Coastal Financial Corporation (Nasdaq: CCB) (the “Company”,
"Coastal", "we", "our", or "us"), the holding company for Coastal
Community Bank (the “Bank”), through which it operates a
community-focused bank with an industry leading banking as a
service ("BaaS") segment, today reported unaudited financial
results for the quarter ended September 30, 2024, including
net income of $13.5 million, or $0.97 per diluted common share,
compared to $11.6 million, or $0.84 per diluted common share, for
the three months ended June 30, 2024.
Management Discussion of the
Quarter
“The third quarter demonstrated strong momentum
across both our community bank and CCBX operating segments, despite
a still challenging operating environment,” said CEO Eric Sprink.
“We saw high quality net loan growth of $92.4 million despite
selling $423.7 million in loans. We are implementing strategies to
increase fee income and we continue to build out and invest in an
infrastructure that is scalable, and that we believe will enable us
to be innovative leaders in financial services.”
Key Points for Third Quarter and Our
Go-Forward Strategy
- Balance Sheet Well
Positioned for Lower Rates. Our balance sheet stands in a
modestly liability sensitive position as of September 30,
2024, with $1.95 billion of CCBX deposits that contractually
reprice lower immediately upon any reduction in the Federal Funds
Rate, with $1.09 billion of CCBX loans repricing in 90 days or
less following such reduction. The Federal Open Market Committee
recently lowered the targeted Federal Funds rate 0.50% on
September 19, 2024; a reduction of 0.50% compared to
June 30, 2024 and September 30, 2023. The rate decrease
came late in the quarter, so the full impact of this and any
subsequent rate changes will be reflected in future periods.
- Expanding Relationships
with CCBX Partners. We continue to focus on expanding
product offerings with existing CCBX partners. We believe that
launching new products with existing partners positions us to reach
a wide and established customer base with modest increase in
enterprise risk. Products launched in 2024 with existing partners
have gained traction and are growing the balance sheet and
increasing income. The pipeline for CCBX is active, although we
expect to remain selective in adding new partners to manage risk
and capital.
- On-going Loan
Sales. We sold $423.7 million loans in the quarter ended
September 30, 2024 as part of our strategy to balance credit
risk, manage partner and lending limits, protect capital levels and
move credit card balances to an off balance sheet fee generating
model. We are retaining a portion of the fee income for our role in
processing transactions on sold credit card balances. This provides
an on-going and passive revenue stream with no on balance sheet
risk.
- Continued Regulatory and
Compliance Infrastructure Investments Position Us Well for Next
Phase of Growth. We continue to utilize co-sourced
personnel as a component of our risk and compliance efforts. This
flexible co-sourcing approach allows us to manage the growth of our
internal team while also ensuring CCBX has the resources it needs.
While we remain 100% indemnified against partner fraud losses, we
were encouraged to see fraudulent activity amongst our partners
remains low during the current quarter, compared to the same period
last year, a positive indicator of our continued investments in our
risk infrastructure.
- Reorganization and
Strengthening of Talent to Accommodate Growth and Plans for the
Future. We recently announced the bifurcation of the
President of the Bank into two roles, appointing Brian Hamilton as
President of CCBX, the Fintech and BaaS segment of the Bank, with
Curt Queyrouze serving as President of the community bank and
corporate credit.
Third Quarter 2024 Financial
Highlights
The tables below outline some of our key
operating metrics.
| |
|
Three Months Ended |
| (Dollars in thousands, except
share and per share data; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
March 31, 2024 |
|
December 31,2023 |
|
September 30,2023 |
| Income Statement
Data: |
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
|
$ |
105,079 |
|
|
$ |
97,487 |
|
|
$ |
90,472 |
|
|
$ |
88,243 |
|
|
$ |
88,331 |
|
| Interest expense |
|
|
32,892 |
|
|
|
31,250 |
|
|
|
29,536 |
|
|
|
28,586 |
|
|
|
26,102 |
|
| Net interest income |
|
|
72,187 |
|
|
|
66,237 |
|
|
|
60,936 |
|
|
|
59,657 |
|
|
|
62,229 |
|
| Provision for credit
losses |
|
|
70,257 |
|
|
|
62,325 |
|
|
|
83,158 |
|
|
|
60,789 |
|
|
|
27,253 |
|
| Net interest (expense)/ income
after provision for credit losses |
|
|
1,930 |
|
|
|
3,912 |
|
|
|
(22,222 |
) |
|
|
(1,132 |
) |
|
|
34,976 |
|
| Noninterest income |
|
|
80,068 |
|
|
|
69,918 |
|
|
|
86,955 |
|
|
|
64,694 |
|
|
|
34,579 |
|
| Noninterest expense |
|
|
65,616 |
|
|
|
58,809 |
|
|
|
56,018 |
|
|
|
51,703 |
|
|
|
56,501 |
|
| Provision for income tax |
|
|
2,926 |
|
|
|
3,425 |
|
|
|
1,915 |
|
|
|
2,847 |
|
|
|
2,784 |
|
| Net income |
|
|
13,456 |
|
|
|
11,596 |
|
|
|
6,800 |
|
|
|
9,012 |
|
|
|
10,270 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
As of and for the Three Month Period |
| |
|
September 30,2024 |
|
June 30,2024 |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
| Balance Sheet
Data: |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
484,026 |
|
|
$ |
487,245 |
|
|
$ |
515,128 |
|
|
$ |
483,128 |
|
|
$ |
474,946 |
|
| Investment securities |
|
|
48,620 |
|
|
|
49,213 |
|
|
|
50,090 |
|
|
|
150,364 |
|
|
|
141,489 |
|
| Loans held for sale |
|
|
7,565 |
|
|
|
— |
|
|
|
797 |
|
|
|
— |
|
|
|
— |
|
| Loans receivable |
|
|
3,418,832 |
|
|
|
3,326,460 |
|
|
|
3,199,554 |
|
|
|
3,026,092 |
|
|
|
2,967,035 |
|
| Allowance for credit
losses |
|
|
(170,263 |
) |
|
|
(147,914 |
) |
|
|
(139,258 |
) |
|
|
(116,958 |
) |
|
|
(101,085 |
) |
| Total assets |
|
|
4,065,821 |
|
|
|
3,961,546 |
|
|
|
3,865,258 |
|
|
|
3,753,366 |
|
|
|
3,678,265 |
|
| Interest bearing deposits |
|
|
3,047,861 |
|
|
|
2,949,643 |
|
|
|
2,888,867 |
|
|
|
2,735,161 |
|
|
|
2,637,914 |
|
| Noninterest bearing
deposits |
|
|
579,427 |
|
|
|
593,789 |
|
|
|
574,112 |
|
|
|
625,202 |
|
|
|
651,786 |
|
| Core deposits (1) |
|
|
3,190,869 |
|
|
|
3,528,339 |
|
|
|
3,447,864 |
|
|
|
3,342,004 |
|
|
|
3,269,082 |
|
| Total deposits |
|
|
3,627,288 |
|
|
|
3,543,432 |
|
|
|
3,462,979 |
|
|
|
3,360,363 |
|
|
|
3,289,700 |
|
| Total borrowings |
|
|
47,847 |
|
|
|
47,810 |
|
|
|
47,771 |
|
|
|
47,734 |
|
|
|
47,695 |
|
| Total shareholders’
equity |
|
|
331,930 |
|
|
|
316,693 |
|
|
|
303,709 |
|
|
|
294,978 |
|
|
|
284,450 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Share and Per Share
Data (2): |
|
|
|
|
|
|
|
|
|
|
| Earnings per share –
basic |
|
$ |
1.00 |
|
|
$ |
0.86 |
|
|
$ |
0.51 |
|
|
$ |
0.68 |
|
|
$ |
0.77 |
|
| Earnings per share –
diluted |
|
$ |
0.97 |
|
|
$ |
0.84 |
|
|
$ |
0.50 |
|
|
$ |
0.66 |
|
|
$ |
0.75 |
|
| Dividends per share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Book value per share (3) |
|
$ |
24.51 |
|
|
$ |
23.54 |
|
|
$ |
22.65 |
|
|
$ |
22.17 |
|
|
$ |
21.38 |
|
| Tangible book value per share
(4) |
|
$ |
24.51 |
|
|
$ |
23.54 |
|
|
$ |
22.65 |
|
|
$ |
22.17 |
|
|
$ |
21.38 |
|
| Weighted avg outstanding
shares – basic |
|
|
13,447,066 |
|
|
|
13,412,667 |
|
|
|
13,340,997 |
|
|
|
13,286,828 |
|
|
|
13,285,974 |
|
| Weighted avg outstanding
shares – diluted |
|
|
13,822,270 |
|
|
|
13,736,508 |
|
|
|
13,676,917 |
|
|
|
13,676,513 |
|
|
|
13,675,833 |
|
| Shares outstanding at end of
period |
|
|
13,543,282 |
|
|
|
13,453,805 |
|
|
|
13,407,320 |
|
|
|
13,304,339 |
|
|
|
13,302,449 |
|
| Stock options outstanding at
end of period |
|
|
198,370 |
|
|
|
286,119 |
|
|
|
309,069 |
|
|
|
354,969 |
|
|
|
356,359 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| See footnotes
that follow the tables below |
| |
| |
|
As of and for the Three Month Period |
| |
|
September 30,2024 |
|
June 30,2024 |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
| Credit Quality
Data: |
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets (5) to total assets |
|
|
1.34 |
% |
|
|
1.34 |
% |
|
|
1.42 |
% |
|
|
1.43 |
% |
|
|
1.18 |
% |
| Nonperforming assets (5) to
loans receivable and OREO |
|
|
1.60 |
% |
|
|
1.60 |
% |
|
|
1.71 |
% |
|
|
1.78 |
% |
|
|
1.47 |
% |
| Nonperforming loans (5) to
total loans receivable |
|
|
1.60 |
% |
|
|
1.60 |
% |
|
|
1.71 |
% |
|
|
1.78 |
% |
|
|
1.47 |
% |
| Allowance for credit losses to
nonperforming loans |
|
|
311.5 |
% |
|
|
278.1 |
% |
|
|
253.8 |
% |
|
|
217.2 |
% |
|
|
232.2 |
% |
| Allowance for credit losses to
total loans receivable |
|
|
4.98 |
% |
|
|
4.45 |
% |
|
|
4.35 |
% |
|
|
3.86 |
% |
|
|
3.41 |
% |
| Gross charge-offs |
|
$ |
53,305 |
|
|
$ |
55,207 |
|
|
$ |
58,994 |
|
|
$ |
47,652 |
|
|
$ |
37,879 |
|
| Gross recoveries |
|
$ |
4,069 |
|
|
$ |
1,973 |
|
|
$ |
1,776 |
|
|
$ |
2,781 |
|
|
$ |
1,045 |
|
| Net charge-offs to average
loans (6) |
|
|
5.65 |
% |
|
|
6.57 |
% |
|
|
7.34 |
% |
|
|
5.92 |
% |
|
|
4.77 |
% |
| |
|
|
|
|
|
|
|
|
|
|
| Capital
Ratios: |
|
|
|
|
|
|
|
|
|
|
| Company |
|
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
|
8.40 |
% |
|
|
8.31 |
% |
|
|
8.24 |
% |
|
|
8.10 |
% |
|
|
8.03 |
% |
| Common equity Tier 1
risk-based capital |
|
|
9.26 |
% |
|
|
9.03 |
% |
|
|
8.98 |
% |
|
|
9.10 |
% |
|
|
9.00 |
% |
| Tier 1 risk-based capital |
|
|
9.35 |
% |
|
|
9.13 |
% |
|
|
9.08 |
% |
|
|
9.20 |
% |
|
|
9.11 |
% |
| Total risk-based capital |
|
|
11.90 |
% |
|
|
11.70 |
% |
|
|
11.70 |
% |
|
|
11.87 |
% |
|
|
11.80 |
% |
| Bank |
|
|
|
|
|
|
|
|
|
|
| Tier 1 leverage capital |
|
|
9.29 |
% |
|
|
9.24 |
% |
|
|
9.19 |
% |
|
|
9.06 |
% |
|
|
8.99 |
% |
| Common equity Tier 1
risk-based capital |
|
|
10.36 |
% |
|
|
10.15 |
% |
|
|
10.14 |
% |
|
|
10.30 |
% |
|
|
10.21 |
% |
| Tier 1 risk-based capital |
|
|
10.36 |
% |
|
|
10.15 |
% |
|
|
10.14 |
% |
|
|
10.30 |
% |
|
|
10.21 |
% |
| Total risk-based capital |
|
|
11.65 |
% |
|
|
11.44 |
% |
|
|
11.43 |
% |
|
|
11.58 |
% |
|
|
11.48 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Core deposits are defined as all
deposits excluding brokered and all time deposits.
(2) Share and per share amounts are based on total
actual or average common shares outstanding, as applicable.
(3) We calculate book value per share as total
shareholders’ equity at the end of the relevant period divided by
the outstanding number of our common shares at the end of each
period.(4) Tangible book value per share is a non-GAAP
financial measure. We calculate tangible book value per share as
total shareholders’ equity at the end of the relevant period, less
goodwill and other intangible assets, divided by the outstanding
number of our common shares at the end of each period. The most
directly comparable GAAP financial measure is book value per share.
We had no goodwill or other intangible assets as of any of the
dates indicated. As a result, tangible book value per share is the
same as book value per share as of each of the dates indicated.
(5) Nonperforming assets and nonperforming loans include
loans 90+ days past due and accruing interest.
(6) Annualized calculations.
Key Performance Ratios
Return on average assets ("ROA") was 1.34% for
the quarter ended September 30, 2024 compared to 1.21% and
1.13% for the quarters ended June 30, 2024 and
September 30, 2023, respectively. ROA for the
quarter ended September 30, 2024, increased 0.13% and 0.21%
compared to June 30, 2024 and September 30, 2023,
respectively. Noninterest expenses were higher for the quarter
ended September 30, 2024 compared to the quarters ended
June 30, 2024 and September 30, 2023 largely due to an
increase in BaaS loan expense, which is directly related to the
increase in the amount of interest earned on CCBX loans.
The following table shows the Company’s key
performance ratios for the periods indicated.
| |
|
Three Months Ended |
|
(unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.34 |
% |
|
1.21 |
% |
|
0.73 |
% |
|
0.97 |
% |
|
1.13 |
% |
| Return on average equity
(1) |
|
16.67 |
% |
|
15.22 |
% |
|
9.21 |
% |
|
12.35 |
% |
|
14.60 |
% |
| Yield on earnings assets
(1) |
|
10.79 |
% |
|
10.49 |
% |
|
10.07 |
% |
|
9.77 |
% |
|
10.08 |
% |
| Yield on loans receivable
(1) |
|
11.43 |
% |
|
11.23 |
% |
|
10.85 |
% |
|
10.71 |
% |
|
10.84 |
% |
| Cost of funds (1) |
|
3.62 |
% |
|
3.60 |
% |
|
3.52 |
% |
|
3.39 |
% |
|
3.18 |
% |
| Cost of deposits (1) |
|
3.59 |
% |
|
3.58 |
% |
|
3.49 |
% |
|
3.36 |
% |
|
3.14 |
% |
| Net interest margin (1) |
|
7.41 |
% |
|
7.13 |
% |
|
6.78 |
% |
|
6.61 |
% |
|
7.10 |
% |
| Noninterest expense to average
assets (1) |
|
6.54 |
% |
|
6.14 |
% |
|
6.04 |
% |
|
5.56 |
% |
|
6.23 |
% |
| Noninterest income to average
assets (1) |
|
7.98 |
% |
|
7.30 |
% |
|
9.38 |
% |
|
6.95 |
% |
|
3.81 |
% |
| Efficiency ratio |
|
43.10 |
% |
|
43.19 |
% |
|
37.88 |
% |
|
41.58 |
% |
|
58.36 |
% |
| Loans receivable to deposits
(2) |
|
94.46 |
% |
|
93.88 |
% |
|
92.42 |
% |
|
90.05 |
% |
|
90.19 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Annualized calculations shown for
quarterly periods presented.(2) Includes loans held for
sale.
Management Outlook; CEO Eric
Sprink
“As we look ahead to the fourth quarter and
2025, we remain laser focused on building out our technology and
risk management infrastructure to more efficiently support our next
phase of growth within CCBX. While the balance sheet re-mix earlier
this year resulted in a short-term reduction to income, we continue
to make strategic decisions which are enhancing credit quality,
generating passive fee income, strengthening our talent and growing
relationships with established and prospective CCBX partners all of
which are expected to position Coastal to be more profitable in
2025.”
Coastal Financial Corporation
Overview
The Company has one main subsidiary, the Bank
which consists of three segments: CCBX, the community bank and
treasury & administration. The CCBX segment includes
all of our BaaS activities, the community bank segment includes all
community banking activities, and the treasury & administration
segment includes treasury management, overall administration and
all other aspects of the Company.
CCBX Performance Update
Our CCBX segment continues to evolve, and we
have 22 relationships, at varying stages, as of September 30,
2024. We continue to refine the criteria for CCBX
partnerships, are exiting relationships where it makes sense for us
to do so and are focusing on larger more established partners, with
experienced management teams, existing customer bases and strong
financial positions.
We are expanding product offerings with our
existing CCBX partners. We believe that launching new products with
existing partners positions us to reach a wide and established
customer base with a modest increase in regulatory risk given we
have already vetted these partners and have operational history.
Products launched earlier in the year with existing partners have
gained traction and are growing the balance sheet and increasing
income. We continue to sell loans as part of our strategy to
balance partner and lending limits, and manage the loan portfolio
and credit quality. We retain a portion of the fee income for our
role in processing transactions on sold credit card balances. This
is expected to provide an on-going and passive revenue stream with
no on balance sheet risk.
The following table illustrates the activity and
evolution in CCBX relationships for the periods presented.
| |
|
As of |
|
(unaudited) |
|
September 30, 2024 |
June 30,2024 |
September 30, 2023 |
|
Active |
|
19 |
19 |
18 |
| Friends and family /
testing |
|
1 |
1 |
1 |
| Implementation /
onboarding |
|
1 |
1 |
1 |
| Signed letters of intent |
|
1 |
0 |
1 |
| Wind down - active but
preparing to exit relationship |
|
0 |
0 |
1 |
|
Total CCBX relationships |
|
22 |
21 |
22 |
|
|
CCBX loans increased $106.9 million, or 7.6%,
despite selling $423.7 million loans during the three months ended
September 30, 2024 to $1.52 billion, while we continued to
enhance credit standards on new CCBX loan originations. In
accordance with the program agreement for one partner, effective
April 1, 2024, the portion of the CCBX portfolio that we are
responsible for losses on decreased from 10% to 5%. At
September 30, 2024 the portion of this portfolio for which we
are responsible represented $19.8 million in loans.
The following table details the CCBX loan
portfolio:
|
CCBX |
|
As of |
|
|
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital call lines |
|
$ |
103,924 |
|
|
6.8 |
% |
|
$ |
109,133 |
|
|
7.7 |
% |
|
$ |
114,174 |
|
|
9.6 |
% |
|
All other commercial & industrial loans |
|
|
36,494 |
|
|
2.4 |
|
|
|
41,731 |
|
|
3.0 |
|
|
|
58,869 |
|
|
5.0 |
|
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans |
|
|
265,402 |
|
|
17.5 |
|
|
|
287,950 |
|
|
20.4 |
|
|
|
251,775 |
|
|
21.3 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
633,691 |
|
|
41.6 |
|
|
|
549,241 |
|
|
38.7 |
|
|
|
440,993 |
|
|
37.3 |
|
|
Other consumer and other loans |
|
|
482,228 |
|
|
31.7 |
|
|
|
426,809 |
|
|
30.2 |
|
|
|
316,987 |
|
|
26.8 |
|
|
Gross CCBX loans receivable |
|
|
1,521,739 |
|
|
100.0 |
% |
|
|
1,414,864 |
|
|
100.0 |
% |
|
|
1,182,798 |
|
|
100.0 |
% |
| Net deferred origination
(fees) costs |
|
|
(447 |
) |
|
|
|
|
(438 |
) |
|
|
|
|
(424 |
) |
|
|
|
Loans receivable |
|
$ |
1,521,292 |
|
|
|
|
$ |
1,414,426 |
|
|
|
|
$ |
1,182,374 |
|
|
|
| Loan Yield - CCBX (1)(2) |
|
|
17.35 |
% |
|
|
|
|
17.77 |
% |
|
|
|
|
17.05 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(1) CCBX yield does
not include the impact of BaaS loan expense. BaaS loan
expense represents the amount paid or payable to partners for
credit enhancements and originating & servicing CCBX loans. See
reconciliation of the non-GAAP measures at the end of this earnings
release for the impact of BaaS loan expense on CCBX loan
yield.(2) Loan yield is annualized for the three months
ended for each period presented and includes loans held for sale
and nonaccrual loans.
The increase in CCBX loans in the quarter ended
September 30, 2024, includes an increase of $139.9 million or
14.3%, in consumer and other loans, partially offset by a $22.5
million, or 7.8%, decrease in residential real estate loans and a
decrease of $5.2 million, or 4.8%, in capital call lines as a
result of normal balance fluctuations and business activities. We
continue to monitor and manage the CCBX loan portfolio, and sold
$423.7 million in CCBX loans during the quarter ended
September 30, 2024 compared to sales of $155.2 million in the
quarter ended June 30, 2024. We continue to reposition
ourselves by managing CCBX credit and concentration levels in an
effort to optimize our loan portfolio and generate off balance
sheet fee income.
Our credit card program through CCBX continues
to grow in dollars and number of active cards as shown in the graph
below:
The following table details the CCBX deposit
portfolio:
|
CCBX |
|
As of |
|
|
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
60,655 |
|
|
2.9 |
% |
|
$ |
62,234 |
|
|
3.0 |
% |
|
$ |
67,782 |
|
|
3.9 |
% |
| Interest bearing demand and
money market |
|
|
1,991,858 |
|
|
94.6 |
|
|
|
1,989,105 |
|
|
96.7 |
|
|
|
1,679,921 |
|
|
95.9 |
|
| Savings |
|
|
5,204 |
|
|
0.3 |
|
|
|
5,150 |
|
|
0.3 |
|
|
|
4,529 |
|
|
0.2 |
|
|
Total core deposits |
|
|
2,057,717 |
|
|
97.8 |
|
|
|
2,056,489 |
|
|
100.0 |
|
|
|
1,752,232 |
|
|
100.0 |
|
| Other deposits |
|
|
47,046 |
|
|
2.2 |
|
|
|
— |
|
|
0.0 |
|
|
|
— |
|
|
— |
|
|
Total CCBX deposits |
|
$ |
2,104,763 |
|
|
100.0 |
% |
|
$ |
2,056,489 |
|
|
100.0 |
% |
|
$ |
1,752,232 |
|
|
100.0 |
% |
| Cost of deposits (1) |
|
|
4.82 |
% |
|
|
|
|
4.92 |
% |
|
|
|
|
4.80 |
% |
|
|
(1) Cost of deposits is annualized
for the three months ended for each period presented.CCBX deposits
increased $48.3 million, or 2.3%, in the three months ended
September 30, 2024 to $2.10 billion. This excludes the $214.5
million in CCBX deposits that were transferred off balance sheet
for increased Federal Deposit Insurance Corporation ("FDIC")
insurance coverage purposes, compared to $117.7 million for the
quarter ended June 30, 2024. Amounts in excess of FDIC
insurance coverage are transferred, using a third party
facilitator/vendor sweep product, to participating financial
institutions.
Community Bank Performance
Update
In the quarter ended September 30, 2024,
the community bank saw net loans decrease $14.5 million, or 0.8%,
to $1.90 billion.
The following table details the Community Bank
loan portfolio:
|
Community Bank |
|
As of |
|
|
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
| (dollars in thousands;
unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Commercial and industrial loans |
|
$ |
152,161 |
|
|
8.0 |
% |
|
$ |
144,436 |
|
|
7.5 |
% |
|
$ |
158,232 |
|
|
8.8 |
% |
| Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction, land and land development loans |
|
|
163,051 |
|
|
8.6 |
|
|
|
173,064 |
|
|
9.0 |
|
|
|
167,686 |
|
|
9.4 |
|
|
Residential real estate loans |
|
|
212,467 |
|
|
11.2 |
|
|
|
229,639 |
|
|
12.0 |
|
|
|
225,372 |
|
|
12.6 |
|
|
Commercial real estate loans |
|
|
1,362,452 |
|
|
71.5 |
|
|
|
1,357,979 |
|
|
70.8 |
|
|
|
1,237,849 |
|
|
69.1 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other consumer and other loans |
|
|
14,173 |
|
|
0.7 |
|
|
|
14,220 |
|
|
0.7 |
|
|
|
2,483 |
|
|
0.1 |
|
|
Gross Community Bank loans receivable |
|
|
1,904,304 |
|
|
100.0 |
% |
|
|
1,919,338 |
|
|
100.0 |
% |
|
|
1,791,622 |
|
|
100.0 |
% |
| Net deferred origination
fees |
|
|
(6,764 |
) |
|
|
|
|
(7,304 |
) |
|
|
|
|
(6,961 |
) |
|
|
|
Loans receivable |
|
$ |
1,897,540 |
|
|
|
|
$ |
1,912,034 |
|
|
|
|
$ |
1,784,661 |
|
|
|
| Loan Yield(1) |
|
|
6.64 |
% |
|
|
|
|
6.52 |
% |
|
|
|
|
6.20 |
% |
|
|
(1) Loan yield is annualized for the
three months ended for each period presented and includes loans
held for sale and nonaccrual loans.Community bank loans had a $10.0
million decrease in construction, land and land development loans,
partially offset by an increase of $7.7 million in commercial and
industrial loans and an increase in commercial real estate loans of
$4.5 million during the quarter ended September 30, 2024;
consumer and other loans were flat.
The following table details the community bank
deposit portfolio:
|
Community Bank |
|
As of |
|
|
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands; unaudited) |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Balance |
|
% to Total |
|
Demand, noninterest bearing |
|
$ |
518,772 |
|
|
34.1 |
% |
|
$ |
531,555 |
|
|
35.6 |
% |
|
$ |
584,004 |
|
|
37.9 |
% |
| Interest bearing demand and
money market |
|
|
552,108 |
|
|
36.3 |
|
|
|
876,668 |
|
|
59.0 |
|
|
|
852,747 |
|
|
55.5 |
|
| Savings |
|
|
62,272 |
|
|
4.1 |
|
|
|
63,627 |
|
|
4.3 |
|
|
|
80,099 |
|
|
5.2 |
|
|
Total core deposits |
|
|
1,133,152 |
|
|
74.5 |
|
|
|
1,471,850 |
|
|
98.9 |
|
|
|
1,516,850 |
|
|
98.6 |
|
| Other deposits |
|
|
373,681 |
|
|
24.5 |
|
|
|
1 |
|
|
0.0 |
|
|
|
1 |
|
|
0.0 |
|
| Time deposits less than
$100,000 |
|
|
6,305 |
|
|
0.4 |
|
|
|
6,741 |
|
|
0.5 |
|
|
|
8,635 |
|
|
0.6 |
|
| Time deposits $100,000 and
over |
|
|
9,387 |
|
|
0.6 |
|
|
|
8,351 |
|
|
0.6 |
|
|
|
11,982 |
|
|
0.8 |
|
|
Total Community Bank deposits |
|
$ |
1,522,525 |
|
|
100.0 |
% |
|
$ |
1,486,943 |
|
|
100.0 |
% |
|
$ |
1,537,468 |
|
|
100.0 |
% |
| Cost of deposits(1) |
|
|
1.92 |
% |
|
|
|
|
1.77 |
% |
|
|
|
|
1.31 |
% |
|
|
(1) Cost of deposits is annualized
for the three months ended for each period presented.Community bank
deposits increased $35.6 million, or 2.4%, during the three months
ended September 30, 2024 to $1.52 billion. This is the second
consecutive quarter of growth after allowing higher rate balances
to run-off earlier in the year. The community bank segment includes
noninterest bearing deposits of $518.8 million, or 34.1%, of total
community bank deposits, resulting in a cost of deposits of 1.92%,
which compared to 1.77% for the quarter ended June 30,
2024.
Net Interest Income and Margin
Discussion
Net interest income was $72.2 million for the
quarter ended September 30, 2024, an increase of $5.9 million,
or 9.0%, from $66.2 million for the quarter ended June 30,
2024, and an increase of $10.0 million, or 16.0%, from $62.2
million for the quarter ended September 30, 2023. The
increase in net interest income compared to June 30, 2024, was
a result of increased interest income due to an increase in average
loans receivable partially offset by an increase in cost of funds.
The increase in net interest income compared to September 30,
2023 was largely related to increased yield on loans resulting from
higher interest rates and growth in higher yielding loans partially
offset by an increase in cost of funds relating to higher interest
rates and growth in interest bearing deposits.
Net interest margin was 7.41% for the three
months ended September 30, 2024, compared to 7.13% for the
three months ended June 30, 2024, with the increase primarily
due to higher loan yields. Net interest margin was 7.10% for the
three months ended September 30, 2023. The increase in net
interest margin for the three months ended September 30, 2024
compared to the three months ended September 30, 2023 was
largely due to an increase in loan yield partially offset by higher
interest rates on interest bearing deposits. Interest and fees on
loans receivable increased $8.6 million, or 9.5%, to $99.6 million
for the three months ended September 30, 2024, compared to
$90.9 million for the three months ended June 30, 2024, and
increased $15.9 million, or 19.1%, compared to $83.7 million for
the three months ended September 30, 2023, due to an increase
in outstanding balances and higher interest rates.
Average investment securities decreased $795,000
to $49.0 million compared to the three months ended June 30,
2024 and decreased $69.0 million compared to the three months ended
September 30, 2023 as a result of maturing securities.
Cost of funds was 3.62% for the quarter ended
September 30, 2024, an increase of 2 basis points from the
quarter ended June 30, 2024 and an increase of 44 basis points
from the quarter ended September 30, 2023. Cost of deposits
for the quarter ended September 30, 2024 was 3.59%, compared
to 3.58% for the quarter ended June 30, 2024, and 3.14% for
the quarter ended September 30, 2023. The increased cost of
funds and deposits compared to June 30, 2024 and
September 30, 2023 was due to the continued high interest rate
environment. The late September reduction in the Fed funds rate is
expected to help to lower our cost of deposits in future
periods.
The following table summarizes the average yield
on loans receivable and cost of deposits:
| |
|
For the Three Months Ended |
| |
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
| |
|
Yield onLoans
(2) |
|
Cost ofDeposits
(2) |
|
Yield onLoans
(2) |
|
Cost ofDeposits
(2) |
|
Yield onLoans
(2) |
|
Cost ofDeposits
(2) |
|
Community Bank |
|
6.64 |
% |
|
1.92 |
% |
|
6.52 |
% |
|
1.77 |
% |
|
6.20 |
% |
|
1.31 |
% |
| CCBX (1) |
|
17.35 |
% |
|
4.82 |
% |
|
17.77 |
% |
|
4.92 |
% |
|
17.05 |
% |
|
4.80 |
% |
| Consolidated |
|
11.43 |
% |
|
3.59 |
% |
|
11.23 |
% |
|
3.58 |
% |
|
10.84 |
% |
|
3.14 |
% |
(1) CCBX yield on loans does not
include the impact of BaaS loan expense. BaaS loan
expense represents the amount paid or payable to partners for
credit and fraud enhancements and originating & servicing CCBX
loans. To determine Net BaaS loan income earned
from CCBX loan relationships, the Company takes BaaS loan interest
income and deducts BaaS loan expense to arrive at Net BaaS loan
income which can be compared to interest income on the Company’s
community bank loans. See reconciliation of the non-GAAP measures
at the end of this earnings release for the impact of BaaS loan
expense on CCBX loan yield.(2) Annualized calculations
for periods shown.
The following tables illustrates how BaaS loan
interest income is affected by BaaS loan expense resulting in net
BaaS loan income and the associated yield:
| |
|
For the Three Months Ended |
| |
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands, unaudited) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
Income / Expense |
|
Income / expense divided byaverage CCBX
loans(2) |
|
Income / Expense |
|
Income / expense divided by average CCBX loans
(2) |
|
BaaS loan interest income |
|
$ |
67,692 |
|
17.35 |
% |
|
$ |
60,203 |
|
17.77 |
% |
|
$ |
56,279 |
|
17.05 |
% |
| Less: BaaS loan expense |
|
|
32,612 |
|
8.36 |
% |
|
|
29,076 |
|
8.58 |
% |
|
|
23,003 |
|
6.97 |
% |
|
Net BaaS loan income (1) |
|
$ |
35,080 |
|
8.99 |
% |
|
$ |
31,127 |
|
9.19 |
% |
|
$ |
33,276 |
|
10.08 |
% |
| Average BaaS Loans(3) |
|
$ |
1,552,443 |
|
|
|
$ |
1,362,343 |
|
|
|
$ |
1,309,380 |
|
|
(1) A reconciliation of the non-GAAP measures
are set forth at the end of this earnings release.(2) Annualized
calculations shown for quarterly periods presented.(3) Includes
loans held for sale.
Noninterest Income
Discussion
Noninterest income was $80.1 million for the
three months ended September 30, 2024, an increase of $10.2
million from $69.9 million for the three months ended June 30,
2024, and an increase of $45.5 million from $34.6 million for the
three months ended September 30, 2023. The increase
in noninterest income over the quarter ended June 30, 2024 was
primarily due to an increase of $9.9 million in total BaaS
income. The $9.9 million increase in total BaaS income
included a $9.3 million increase in BaaS credit enhancements
related to the provision for credit losses, a $300,000 increase in
BaaS fraud enhancements, and an increase of $340,000 in BaaS
program income. The increase in BaaS program income is largely due
to higher servicing and other BaaS fees, transaction fees and
interchange fees and our primary BaaS source for recurring fee
income (see “Appendix B” for more information on the accounting for
BaaS allowance for credit losses and credit and fraud
enhancements). Additionally, other income increased $229,000
largely due to increased incoming ACH activity.
The $45.5 million increase in noninterest income
over the quarter ended September 30, 2023 was primarily due to
a $43.4 million increase in BaaS credit and fraud enhancements, and
an increase of $2.0 million in BaaS program income.
Noninterest Expense
DiscussionTotal noninterest expense increased $6.8 million
to $65.6 million for the three months ended September 30,
2024, compared to $58.8 million for the three months ended
June 30, 2024, and increased $9.1 million from $56.5 million
for the three months ended September 30, 2023. The increase in
noninterest expense for the quarter ended September 30, 2024,
as compared to the quarter ended June 30, 2024, was primarily
due to a $3.8 million increase in BaaS expense (including a
$300,000 increase in BaaS fraud expense and a $3.5 million increase
in BaaS loan expense). BaaS loan expense represents the amount paid
or payable to partners for credit enhancements, fraud enhancements,
and originating & servicing CCBX loans. BaaS fraud expense
represents non-credit fraud losses on partner’s customer loan and
deposit accounts. A portion of this expense is realized during the
quarter in which the loss occurs, and a portion is estimated based
on historical or other information from our partners, partially
offset by a $1.5 million increase in excise taxes (due to the
recording of $1.2 million business and occupation tax credit from
the State of Washington which resulted in the recognition of a net
credit of $706,000 for the quarter ended June 30, 2024,
compared to expense of $762,000 for the quarter ended
September 30, 2024). We also recorded an increase of $587,000
in data processing and software licenses as a result of our
continued investment in our infrastructure and the automation of
our processes so that they are scalable and an increase of $499,000
in point of sale expenses as a result of increased partner
transaction activity.
The increase in noninterest expenses for the
quarter ended September 30, 2024 compared to the quarter ended
September 30, 2023 was largely due to an increase of $8.8
million in BaaS partner expense (including a $9.6 million increase
in BaaS loan expense partially offset by a decrease of $766,000 in
BaaS fraud expense), a $1.1 million increase in data processing and
software licenses due to enhancements in technology, and a $526,000
increase in occupancy expense, largely due to higher software
depreciation/amortization expense, partially offset by a $986,000
decrease in salary and employee benefits largely as a result of
some one-time costs that were expensed in the quarter ended
September 30, 2023 for which there was no similar expense in
the current quarter, and an $850,000 decrease in legal and
professional expenses as a result of risk management and projects
being completed.
Provision for Income Taxes
The provision for income taxes was $2.9 million
for the three months ended September 30, 2024, $3.4 million
for the three months ended June 30, 2024 and $2.8 million for
the third quarter of 2023. The income tax provision was lower
for the three months ended September 30, 2024 compared to the
quarter ended June 30, 2024 as a result of the deductibility
of certain equity awards which reduced tax expense despite net
income being higher and higher than the quarter ended
September 30, 2023, primarily due to higher net income
compared to that quarter.
The Company is subject to various state taxes
that are assessed as CCBX activities and employees expand into
other states, which has increased the overall tax rate used in
calculating the provision for income taxes in the current and
future periods. The Company uses a federal statutory tax rate of
21.0% as a basis for calculating provision for federal income taxes
and 2.62% for calculating the provision for state income taxes.
Financial Condition
Overview
Total assets increased $104.3 million, or 2.6%,
to $4.07 billion at September 30, 2024 compared to $3.96
billion at June 30, 2024. The increase is primarily
due to stronger loan growth partially offset by lower cash
balances. Total loans receivable increased $92.4 million to $3.42
billion at September 30, 2024, from $3.33 billion at
June 30, 2024.
As of September 30, 2024, the Company had
the capacity to borrow up to a total of $656.3 million from the
Federal Reserve Bank discount window and Federal Home Loan Bank,
and an additional $50.0 million from a correspondent bank no
borrowings outstanding on these lines as of September 30,
2024.
The Company had a cash balance of $5.9 million
as of September 30, 2024, which is retained for general
operating purposes, including debt repayment, and for funding
$530,000 in commitments to bank technology funds.
Uninsured deposits were $542.2 million as of
September 30, 2024, compared to $532.9 million as of
June 30, 2024.
Total shareholders’ equity increased $15.2
million since June 30, 2024. The increase in
shareholders’ equity was primarily due to $13.5 million in net
earnings, combined with an increase of $1.8 million in common stock
outstanding as a result of equity awards exercised during the three
months ended September 30, 2024.
The Company and the Bank remained well
capitalized at September 30, 2024, as summarized in the
following table.
|
(unaudited) |
|
Coastal Community Bank |
|
Coastal Financial Corporation |
|
Minimum Well Capitalized Ratios under Prompt Corrective
Action (1) |
|
Tier 1 Leverage Capital (to average assets) |
|
9.29 |
% |
|
8.40 |
% |
|
5.00 |
% |
| Common Equity Tier 1 Capital
(to risk-weighted assets) |
|
10.36 |
% |
|
9.26 |
% |
|
6.50 |
% |
| Tier 1 Capital (to
risk-weighted assets) |
|
10.36 |
% |
|
9.35 |
% |
|
8.00 |
% |
| Total Capital (to
risk-weighted assets) |
|
11.65 |
% |
|
11.90 |
% |
|
10.00 |
% |
(1) Presents the minimum capital ratios for an
insured depository institution, such as the Bank, to be considered
well capitalized under the Prompt Corrective Action framework. The
minimum requirements for the Company to be considered well
capitalized under Regulation Y include to maintain, on a
consolidated basis, a total risk-based capital ratio of 10.0
percent or greater and a tier 1 risk-based capital ratio of 6.0
percent or greater.
Asset Quality
The total allowance for credit losses was $170.3
million and 4.98% of loans receivable at September 30, 2024
compared to $147.9 million and 4.45% at June 30, 2024 and
$101.1 million and 3.41% at September 30, 2023. The allowance
for credit loss allocated to the CCBX portfolio was $150.1 million
and 9.87% of CCBX loans receivable at September 30, 2024, with
$20.1 million of allowance for credit loss allocated to the
community bank or 1.06% of total community bank loans
receivable.
The following table details the allocation of
the allowance for credit loss as of the period indicated:
| |
|
As of September 30, 2024 |
|
As of June 30, 2024 |
|
As of September 30, 2023 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Loans receivable |
|
$ |
1,897,540 |
|
|
$ |
1,521,292 |
|
|
$ |
3,418,832 |
|
|
$ |
1,912,034 |
|
|
$ |
1,414,426 |
|
|
$ |
3,326,460 |
|
|
$ |
1,784,661 |
|
|
$ |
1,182,374 |
|
|
$ |
2,967,035 |
|
| Allowance for credit
losses |
|
|
(20,132 |
) |
|
|
(150,131 |
) |
|
|
(170,263 |
) |
|
|
(21,045 |
) |
|
|
(126,869 |
) |
|
|
(147,914 |
) |
|
|
(21,316 |
) |
|
|
(79,769 |
) |
|
|
(101,085 |
) |
| Allowance for credit losses to
total loans receivable |
|
|
1.06 |
% |
|
|
9.87 |
% |
|
|
4.98 |
% |
|
|
1.10 |
% |
|
|
8.97 |
% |
|
|
4.45 |
% |
|
|
1.19 |
% |
|
|
6.75 |
% |
|
|
3.41 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs totaled $49.2 million for the
quarter ended September 30, 2024, compared to $53.2 million
for the quarter ended June 30, 2024 and $36.8 million for the
quarter ended September 30, 2023. Net charge-offs as a percent
of average loans decreased to 5.65% for the quarter ended
September 30, 2024 compared to 6.57% for the quarter ended
June 30, 2024, which we believe is a result of the steps we
took manage our credit quality. CCBX partner agreements
provide for a credit enhancement that covers the net-charge-offs on
CCBX loans and negative deposit accounts by indemnifying or
reimbursing incurred losses, except in accordance with the program
agreement for one partner where the Company was responsible for
credit losses on approximately 5% of a $400.8 million loan
portfolio. At September 30, 2024, our portion of this
portfolio represented $19.8 million in loans. Net charge-offs for
this $19.8 million in loans were $1.1 million for the three months
ended September 30, 2024, compared to $1.3 million for the
three months ended June 30, 2024 and $579,000 for the three
months ended September 30, 2023.
The following table details net charge-offs for
the community bank and CCBX for the period indicated:
| |
|
Three Months Ended |
| |
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands; unaudited) |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Community Bank |
|
CCBX |
|
Total |
|
Gross charge-offs |
|
$ |
398 |
|
|
$ |
52,907 |
|
|
$ |
53,305 |
|
|
$ |
2 |
|
|
$ |
55,205 |
|
|
$ |
55,207 |
|
|
$ |
3 |
|
|
$ |
37,876 |
|
|
$ |
37,879 |
|
| Gross recoveries |
|
|
(3 |
) |
|
|
(4,066 |
) |
|
|
(4,069 |
) |
|
|
(4 |
) |
|
|
(1,969 |
) |
|
|
(1,973 |
) |
|
|
(3 |
) |
|
|
(1,042 |
) |
|
|
(1,045 |
) |
|
Net charge-offs |
|
$ |
395 |
|
|
$ |
48,841 |
|
|
$ |
49,236 |
|
|
$ |
(2 |
) |
|
$ |
53,236 |
|
|
$ |
53,234 |
|
|
$ |
— |
|
|
$ |
36,834 |
|
|
$ |
36,834 |
|
| Net charge-offs to average
loans (1) |
|
|
0.08 |
% |
|
|
12.52 |
% |
|
|
5.65 |
% |
|
|
0.00 |
% |
|
|
15.72 |
% |
|
|
6.57 |
% |
|
|
0.00 |
% |
|
|
11.16 |
% |
|
|
4.77 |
% |
(1) Annualized calculations shown for periods
presented.
During the quarter ended September 30,
2024, a $72.1 million provision for credit losses - loans was
recorded for CCBX partner loans based on management’s analysis,
compared to the $62.2 million provision for credit losses - loans
that was recorded for CCBX for the quarter ended June 30,
2024. CCBX loans have a higher level of expected losses than our
community bank loans, which is reflected in the factors for the
allowance for credit losses. Agreements with our CCBX partners
provide for a credit enhancement which protects the Bank by
indemnifying or reimbursing incurred losses.
In accordance with accounting guidance, we
estimate and record a provision for expected losses for these CCBX
loans and reclassified negative deposit accounts. When the
provision for CCBX credit losses and provision for unfunded
commitments is recorded, a credit enhancement asset is also
recorded on the balance sheet through noninterest income (BaaS
credit enhancements). Expected losses are recorded in the allowance
for credit losses. The credit enhancement asset is relieved when
credit enhancement recoveries are received from the CCBX partner.
If our partner is unable to fulfill their contracted obligations
then the Bank could be exposed to additional credit losses.
Management regularly evaluates and manages this counterparty
risk.
The factors used in management’s analysis for
community bank credit losses indicated that a provision recapture
of $519,000 and was needed for the quarter ended September 30,
2024 compared to a provision recapture of $341,000 and provision of
$664,000 for the quarters ended June 30, 2024 and
September 30, 2023, respectively. The recapture in the current
period was largely due to a change in remaining average lives of
community bank loans.
The following table details the provision
expense/(recapture) for the community bank and CCBX for the period
indicated:
| |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
Community bank |
|
$ |
(519 |
) |
|
$ |
(341 |
) |
|
$ |
664 |
| CCBX |
|
|
72,104 |
|
|
|
62,231 |
|
|
|
26,493 |
|
Total provision expense |
|
$ |
71,585 |
|
|
$ |
61,890 |
|
|
$ |
27,157 |
At September 30, 2024, our nonperforming
assets were $54.7 million, or 1.34%, of total assets, compared to
$53.2 million, or 1.34%, of total assets, at June 30, 2024,
and $43.5 million, or 1.18%, of total assets, at September 30,
2023. These ratios are impacted by nonperforming CCBX loans that
are covered by CCBX partner credit enhancements. As of
September 30, 2024, $52.0 million of the $53.6 million in
nonperforming CCBX loans were covered by CCBX partner credit
enhancements described above.
Nonperforming assets increased $1.5 million
during the quarter ended September 30, 2024, compared to the
quarter ended June 30, 2024. This change is largely due to an
increase in CCBX nonaccrual loans partially offset by a decrease in
community bank nonaccrual loans. CCBX nonaccrual loans increased
$8.0 million as a result of a new collection practice that places
certain loans on nonaccrual status to improve collectability, $5.3
million of these loans are less than 90 days past due as of
September 30, 2024. CCBX loans that are past due 90 days or
more and still accruing was $45.6 million for the quarter ended
September 30, 2024 compared to $45.2 million for the quarter
ended June 30, 2024. As a result of the type of loans
(primarily consumer loans) originated through our CCBX partners we
anticipate that balances 90 days past due or more and still
accruing will generally increase as those loan portfolios grow.
Installment/closed-end and revolving/open-end consumer loans
originated through CCBX lending partners will continue to accrue
interest until 120 and 180 days past due, respectively and are
reported as substandard, 90 days or more days past due and still
accruing. There were no repossessed assets or other real estate
owned at September 30, 2024. Our nonperforming loans to loans
receivable ratio was 1.60% at September 30, 2024, compared to
1.60% at June 30, 2024, and 1.47% at September 30,
2023.
For the quarter ended September 30, 2024,
there were $395,000 community bank net charge-offs and $1.1 million
nonperforming community bank loans. For the quarter ended
September 30, 2024 $48.8 million in net charge-offs were
recorded on CCBX loans. These CCBX loans have a higher level of
expected losses than our community bank loans, which is reflected
in the factors for the allowance for credit losses.
The following table details the Company’s
nonperforming assets for the periods indicated.
|
Consolidated |
|
As of |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
|
Commercial and industrial loans |
|
$ |
198 |
|
|
$ |
— |
|
|
$ |
2 |
|
| Real estate loans: |
|
|
|
|
|
|
|
Construction, land and land development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Residential real estate |
|
|
44 |
|
|
|
213 |
|
|
|
176 |
|
|
Commercial real estate |
|
|
831 |
|
|
|
7,731 |
|
|
|
7,145 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
Credit cards |
|
|
7,987 |
|
|
|
— |
|
|
|
— |
|
|
Total nonaccrual loans |
|
|
9,060 |
|
|
|
7,944 |
|
|
|
7,323 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
| Commercial & industrial
loans |
|
|
1,593 |
|
|
|
1,278 |
|
|
|
1,387 |
|
| Real estate loans: |
|
|
|
|
|
|
|
Residential real estate loans |
|
|
3,025 |
|
|
|
2,722 |
|
|
|
1,462 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
Credit cards |
|
|
34,562 |
|
|
|
36,465 |
|
|
|
24,807 |
|
|
Other consumer and other loans |
|
|
6,412 |
|
|
|
4,779 |
|
|
|
8,561 |
|
|
Total accruing loans past due 90 days or
more |
|
|
45,592 |
|
|
|
45,244 |
|
|
|
36,217 |
|
|
Total nonperforming loans |
|
|
54,652 |
|
|
|
53,188 |
|
|
|
43,540 |
|
| Real estate
owned |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
|
$ |
54,652 |
|
|
$ |
53,188 |
|
|
$ |
43,540 |
|
| Total nonaccrual loans to
loans receivable |
|
|
0.27 |
% |
|
|
0.24 |
% |
|
|
0.25 |
% |
| Total nonperforming loans to
loans receivable |
|
|
1.60 |
% |
|
|
1.60 |
% |
|
|
1.47 |
% |
| Total nonperforming assets to
total assets |
|
|
1.34 |
% |
|
|
1.34 |
% |
|
|
1.18 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
The following tables detail the CCBX and
community bank nonperforming assets which are included in the total
nonperforming assets table above.
|
CCBX |
|
As of |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
| Consumer and other loans: |
|
|
|
|
|
|
|
Credit cards |
|
$ |
7,987 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Total nonaccrual loans |
|
|
7,987 |
|
|
|
— |
|
|
|
— |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
| Commercial & industrial
loans |
|
|
1,593 |
|
|
|
1,278 |
|
|
|
1,387 |
|
| Real estate loans: |
|
|
|
|
|
|
|
Residential real estate loans |
|
|
3,025 |
|
|
|
2,722 |
|
|
|
1,462 |
|
| Consumer and other loans: |
|
|
|
|
|
|
|
Credit cards |
|
|
34,562 |
|
|
|
36,465 |
|
|
|
24,807 |
|
|
Other consumer and other loans |
|
|
6,412 |
|
|
|
4,779 |
|
|
|
8,561 |
|
|
Total accruing loans past due 90 days or more |
|
|
45,592 |
|
|
|
45,244 |
|
|
|
36,217 |
|
|
Total nonperforming loans |
|
|
53,579 |
|
|
|
45,244 |
|
|
|
36,217 |
|
| Other real estate
owned |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
|
$ |
53,579 |
|
|
$ |
45,244 |
|
|
$ |
36,217 |
|
| Total CCBX nonperforming
assets to total consolidated assets |
|
|
1.32 |
% |
|
|
1.14 |
% |
|
|
0.98 |
% |
|
Community Bank |
|
As of |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
Nonaccrual loans: |
|
|
|
|
|
|
|
Commercial and industrial loans |
|
$ |
198 |
|
|
$ |
— |
|
|
$ |
2 |
|
| Real estate: |
|
|
|
|
|
|
|
Construction, land and land development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Residential real estate |
|
|
44 |
|
|
|
213 |
|
|
|
176 |
|
|
Commercial real estate |
|
|
831 |
|
|
|
7,731 |
|
|
|
7,145 |
|
|
Total nonaccrual loans |
|
|
1,073 |
|
|
|
7,944 |
|
|
|
7,323 |
|
| Accruing loans past
due 90 days or more: |
|
|
|
|
|
|
|
Total accruing loans past due 90 days or more |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total nonperforming loans |
|
|
1,073 |
|
|
|
7,944 |
|
|
|
7,323 |
|
| Other real estate
owned |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Repossessed
assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total nonperforming
assets |
|
$ |
1,073 |
|
|
$ |
7,944 |
|
|
$ |
7,323 |
|
| Total community bank
nonperforming assets to total consolidated assets |
|
|
0.03 |
% |
|
|
0.20 |
% |
|
|
0.20 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the
“Company”), is an Everett, Washington based bank holding company
whose wholly owned subsidiaries are Coastal Community Bank (“Bank”)
and Arlington Olympic LLC. The $4.07 billion Bank
provides service through 14 branches in Snohomish, Island, and King
Counties, the Internet and its mobile banking
application. The Bank provides banking as a service to
broker-dealers, digital financial service providers, companies and
brands that want to provide financial services to their customers
through the Bank's CCBX segment. To learn more about the
Company visit www.coastalbank.com.
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425)
357-3659Joel Edwards, Executive Vice President & Chief
Financial Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect our
current views with respect to, among other things, future events
and our financial performance. Any statements about our
management’s expectations, beliefs, plans, predictions, forecasts,
objectives, assumptions or future events or performance are not
historical facts and may be forward-looking. These statements are
often, but not always, made through the use of words or phrases
such as “anticipate,” “believes,” “can,” “could,” “may,”
“predicts,” “potential,” “should,” “will,” “estimate,” “plans,”
“projects,” “continuing,” “ongoing,” “expects,” “intends” and
similar words or phrases. Any or all of the forward-looking
statements in this earnings release may turn out to be inaccurate.
The inclusion of or reference to forward-looking information in
this earnings release should not be regarded as a representation by
us or any other person that the future plans, estimates or
expectations contemplated by us will be achieved. We have based
these forward-looking statements largely on our current
expectations and projections about future events and financial
trends that we believe may affect our financial condition, results
of operations, business strategy and financial needs. Our actual
results could differ materially from those anticipated in such
forward-looking statements as a result of risks, uncertainties and
assumptions that are difficult to predict. Factors that could cause
actual results to differ materially from those in the
forward-looking statements include, without limitation, the risks
and uncertainties discussed under “Risk Factors” in our Annual
Report on Form 10-K for the most recent period filed and in any of
our subsequent filings with the Securities and Exchange
Commission.
If one or more events related to these or other
risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may differ
materially from what we anticipate. You are cautioned not to place
undue reliance on forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which it is
made, and we undertake no obligation to update or revise any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events, except as required by law.
|
|
|
COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION(Dollars in thousands; unaudited) |
|
|
|
ASSETS |
|
|
|
September 30,2024 |
|
June 30,2024 |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
Cash and due from banks |
|
$ |
45,327 |
|
|
$ |
59,995 |
|
|
$ |
32,790 |
|
|
$ |
31,345 |
|
|
$ |
29,984 |
|
| Interest earning deposits with
other banks |
|
|
438,699 |
|
|
|
427,250 |
|
|
|
482,338 |
|
|
|
451,783 |
|
|
|
444,962 |
|
| Investment securities, available
for sale, at fair value |
|
|
38 |
|
|
|
39 |
|
|
|
41 |
|
|
|
99,504 |
|
|
|
98,939 |
|
| Investment securities, held to
maturity, at amortized cost |
|
|
48,582 |
|
|
|
49,174 |
|
|
|
50,049 |
|
|
|
50,860 |
|
|
|
42,550 |
|
| Other investments |
|
|
10,757 |
|
|
|
10,664 |
|
|
|
10,583 |
|
|
|
10,227 |
|
|
|
11,898 |
|
| Loans held for sale |
|
|
7,565 |
|
|
|
— |
|
|
|
797 |
|
|
|
— |
|
|
|
— |
|
|
Loans receivable |
|
|
3,418,832 |
|
|
|
3,326,460 |
|
|
|
3,199,554 |
|
|
|
3,026,092 |
|
|
|
2,967,035 |
|
|
Allowance for credit losses |
|
|
(170,263 |
) |
|
|
(147,914 |
) |
|
|
(139,258 |
) |
|
|
(116,958 |
) |
|
|
(101,085 |
) |
|
Total loans receivable, net |
|
|
3,248,569 |
|
|
|
3,178,546 |
|
|
|
3,060,296 |
|
|
|
2,909,134 |
|
|
|
2,865,950 |
|
| CCBX credit enhancement
asset |
|
|
167,251 |
|
|
|
143,485 |
|
|
|
137,276 |
|
|
|
107,921 |
|
|
|
91,867 |
|
| CCBX receivable |
|
|
16,060 |
|
|
|
11,520 |
|
|
|
10,369 |
|
|
|
9,088 |
|
|
|
10,623 |
|
| Premises and equipment, net |
|
|
25,833 |
|
|
|
24,526 |
|
|
|
22,995 |
|
|
|
22,090 |
|
|
|
20,543 |
|
| Lease right-of-use assets |
|
|
5,427 |
|
|
|
5,635 |
|
|
|
5,756 |
|
|
|
5,932 |
|
|
|
6,126 |
|
| Accrued interest receivable |
|
|
23,664 |
|
|
|
23,617 |
|
|
|
24,681 |
|
|
|
26,819 |
|
|
|
23,428 |
|
| Bank-owned life insurance,
net |
|
|
13,255 |
|
|
|
13,132 |
|
|
|
12,991 |
|
|
|
12,870 |
|
|
|
12,970 |
|
| Deferred tax asset, net |
|
|
3,083 |
|
|
|
2,221 |
|
|
|
2,221 |
|
|
|
3,806 |
|
|
|
4,404 |
|
| Other assets |
|
|
11,711 |
|
|
|
11,742 |
|
|
|
12,075 |
|
|
|
11,987 |
|
|
|
14,021 |
|
|
Total assets |
|
$ |
4,065,821 |
|
|
$ |
3,961,546 |
|
|
$ |
3,865,258 |
|
|
$ |
3,753,366 |
|
|
$ |
3,678,265 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
| LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
3,627,288 |
|
|
$ |
3,543,432 |
|
|
$ |
3,462,979 |
|
|
$ |
3,360,363 |
|
|
$ |
3,289,700 |
|
|
Subordinated debt, net |
|
|
44,256 |
|
|
|
44,219 |
|
|
|
44,181 |
|
|
|
44,144 |
|
|
|
44,106 |
|
|
Junior subordinated debentures, net |
|
|
3,591 |
|
|
|
3,591 |
|
|
|
3,590 |
|
|
|
3,590 |
|
|
|
3,589 |
|
|
Deferred compensation |
|
|
369 |
|
|
|
405 |
|
|
|
442 |
|
|
|
479 |
|
|
|
513 |
|
|
Accrued interest payable |
|
|
1,070 |
|
|
|
999 |
|
|
|
1,061 |
|
|
|
892 |
|
|
|
1,056 |
|
|
Lease liabilities |
|
|
5,609 |
|
|
|
5,821 |
|
|
|
5,946 |
|
|
|
6,124 |
|
|
|
6,321 |
|
|
CCBX payable |
|
|
39,188 |
|
|
|
34,536 |
|
|
|
33,095 |
|
|
|
33,651 |
|
|
|
38,229 |
|
|
Other liabilities |
|
|
12,520 |
|
|
|
11,850 |
|
|
|
10,255 |
|
|
|
9,145 |
|
|
|
10,301 |
|
|
Total liabilities |
|
|
3,733,891 |
|
|
|
3,644,853 |
|
|
|
3,561,549 |
|
|
|
3,458,388 |
|
|
|
3,393,815 |
|
| SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
134,769 |
|
|
|
132,989 |
|
|
|
131,601 |
|
|
|
130,136 |
|
|
|
129,244 |
|
|
Retained earnings |
|
|
197,162 |
|
|
|
183,706 |
|
|
|
172,110 |
|
|
|
165,311 |
|
|
|
156,299 |
|
|
Accumulated other comprehensive loss, net of tax |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(469 |
) |
|
|
(1,093 |
) |
|
Total shareholders’ equity |
|
|
331,930 |
|
|
|
316,693 |
|
|
|
303,709 |
|
|
|
294,978 |
|
|
|
284,450 |
|
|
Total liabilities and shareholders’ equity |
|
$ |
4,065,821 |
|
|
$ |
3,961,546 |
|
|
$ |
3,865,258 |
|
|
$ |
3,753,366 |
|
|
$ |
3,678,265 |
|
|
|
|
COASTAL FINANCIAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Dollars in thousands, except per share amounts;
unaudited) |
|
|
|
|
|
Three Months Ended |
|
|
|
September 30,2024 |
|
June 30,2024 |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
| INTEREST AND DIVIDEND INCOME |
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans |
|
$ |
99,590 |
|
$ |
90,944 |
|
|
$ |
84,621 |
|
|
$ |
81,159 |
|
|
$ |
83,652 |
|
Interest on interest earning deposits with other banks |
|
|
4,781 |
|
|
5,683 |
|
|
|
4,780 |
|
|
|
5,687 |
|
|
|
3,884 |
|
Interest on investment securities |
|
|
675 |
|
|
686 |
|
|
|
1,034 |
|
|
|
1,225 |
|
|
|
766 |
|
Dividends on other investments |
|
|
33 |
|
|
174 |
|
|
|
37 |
|
|
|
172 |
|
|
|
29 |
|
Total interest income |
|
|
105,079 |
|
|
97,487 |
|
|
|
90,472 |
|
|
|
88,243 |
|
|
|
88,331 |
| INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits |
|
|
32,083 |
|
|
30,578 |
|
|
|
28,867 |
|
|
|
27,916 |
|
|
|
25,451 |
|
Interest on borrowed funds |
|
|
809 |
|
|
672 |
|
|
|
669 |
|
|
|
670 |
|
|
|
651 |
|
Total interest expense |
|
|
32,892 |
|
|
31,250 |
|
|
|
29,536 |
|
|
|
28,586 |
|
|
|
26,102 |
|
Net interest income |
|
|
72,187 |
|
|
66,237 |
|
|
|
60,936 |
|
|
|
59,657 |
|
|
|
62,229 |
| PROVISION FOR CREDIT LOSSES |
|
|
70,257 |
|
|
62,325 |
|
|
|
83,158 |
|
|
|
60,789 |
|
|
|
27,253 |
|
Net interest income/(expense) after provision for credit
losses |
|
|
1,930 |
|
|
3,912 |
|
|
|
(22,222 |
) |
|
|
(1,132 |
) |
|
|
34,976 |
| NONINTEREST INCOME |
|
|
|
|
|
|
|
|
|
|
|
Deposit service charges and fees |
|
|
952 |
|
|
946 |
|
|
|
908 |
|
|
|
957 |
|
|
|
998 |
|
Loan referral fees |
|
|
— |
|
|
— |
|
|
|
168 |
|
|
|
— |
|
|
|
1 |
|
Gain on sales of loans, net |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
107 |
|
Unrealized gain (loss) on equity securities, net |
|
|
2 |
|
|
9 |
|
|
|
15 |
|
|
|
80 |
|
|
|
5 |
|
Other income |
|
|
486 |
|
|
257 |
|
|
|
308 |
|
|
|
60 |
|
|
|
291 |
|
Noninterest income, excluding BaaS program income and BaaS
indemnification income |
|
|
1,440 |
|
|
1,212 |
|
|
|
1,399 |
|
|
|
1,097 |
|
|
|
1,402 |
|
Servicing and other BaaS fees |
|
|
1,044 |
|
|
1,525 |
|
|
|
1,131 |
|
|
|
1,015 |
|
|
|
997 |
|
Transaction fees |
|
|
1,696 |
|
|
1,309 |
|
|
|
1,122 |
|
|
|
1,006 |
|
|
|
1,036 |
|
Interchange fees |
|
|
1,853 |
|
|
1,625 |
|
|
|
1,539 |
|
|
|
1,272 |
|
|
|
1,216 |
|
Reimbursement of expenses |
|
|
1,843 |
|
|
1,637 |
|
|
|
1,033 |
|
|
|
1,076 |
|
|
|
1,152 |
|
BaaS program income |
|
|
6,436 |
|
|
6,096 |
|
|
|
4,825 |
|
|
|
4,369 |
|
|
|
4,401 |
|
BaaS credit enhancements |
|
|
70,108 |
|
|
60,826 |
|
|
|
79,808 |
|
|
|
58,449 |
|
|
|
25,926 |
|
BaaS fraud enhancements |
|
|
2,084 |
|
|
1,784 |
|
|
|
923 |
|
|
|
779 |
|
|
|
2,850 |
|
BaaS indemnification income |
|
|
72,192 |
|
|
62,610 |
|
|
|
80,731 |
|
|
|
59,228 |
|
|
|
28,776 |
|
Total noninterest income |
|
|
80,068 |
|
|
69,918 |
|
|
|
86,955 |
|
|
|
64,694 |
|
|
|
34,579 |
| NONINTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
|
17,101 |
|
|
17,005 |
|
|
|
17,984 |
|
|
|
16,490 |
|
|
|
18,087 |
|
Occupancy |
|
|
1,750 |
|
|
1,686 |
|
|
|
1,518 |
|
|
|
1,340 |
|
|
|
1,224 |
|
Data processing and software licenses |
|
|
3,511 |
|
|
2,924 |
|
|
|
2,892 |
|
|
|
2,417 |
|
|
|
2,366 |
|
Legal and professional expenses |
|
|
3,597 |
|
|
3,631 |
|
|
|
3,672 |
|
|
|
2,649 |
|
|
|
4,447 |
|
Point of sale expense |
|
|
1,351 |
|
|
852 |
|
|
|
869 |
|
|
|
899 |
|
|
|
1,068 |
|
Excise taxes |
|
|
762 |
|
|
(706 |
) |
|
|
320 |
|
|
|
449 |
|
|
|
541 |
|
Federal Deposit Insurance Corporation ("FDIC") assessments |
|
|
740 |
|
|
690 |
|
|
|
683 |
|
|
|
665 |
|
|
|
694 |
|
Director and staff expenses |
|
|
559 |
|
|
470 |
|
|
|
400 |
|
|
|
478 |
|
|
|
529 |
|
Marketing |
|
|
67 |
|
|
14 |
|
|
|
53 |
|
|
|
138 |
|
|
|
169 |
|
Other expense |
|
|
1,482 |
|
|
1,383 |
|
|
|
1,867 |
|
|
|
1,089 |
|
|
|
1,523 |
|
Noninterest expense, excluding BaaS loan and BaaS fraud
expense |
|
|
30,920 |
|
|
27,949 |
|
|
|
30,258 |
|
|
|
26,614 |
|
|
|
30,648 |
|
BaaS loan expense |
|
|
32,612 |
|
|
29,076 |
|
|
|
24,837 |
|
|
|
24,310 |
|
|
|
23,003 |
|
BaaS fraud expense |
|
|
2,084 |
|
|
1,784 |
|
|
|
923 |
|
|
|
779 |
|
|
|
2,850 |
|
BaaS loan and fraud expense |
|
|
34,696 |
|
|
30,860 |
|
|
|
25,760 |
|
|
|
25,089 |
|
|
|
25,853 |
|
Total noninterest expense |
|
|
65,616 |
|
|
58,809 |
|
|
|
56,018 |
|
|
|
51,703 |
|
|
|
56,501 |
|
Income before provision for income taxes |
|
|
16,382 |
|
|
15,021 |
|
|
|
8,715 |
|
|
|
11,859 |
|
|
|
13,054 |
| PROVISION FOR INCOME TAXES |
|
|
2,926 |
|
|
3,425 |
|
|
|
1,915 |
|
|
|
2,847 |
|
|
|
2,784 |
| NET INCOME |
|
$ |
13,456 |
|
$ |
11,596 |
|
|
$ |
6,800 |
|
|
$ |
9,012 |
|
|
$ |
10,270 |
| Basic earnings per common
share |
|
$ |
1.00 |
|
$ |
0.86 |
|
|
$ |
0.51 |
|
|
$ |
0.68 |
|
|
$ |
0.77 |
| Diluted earnings per common
share |
|
$ |
0.97 |
|
$ |
0.84 |
|
|
$ |
0.50 |
|
|
$ |
0.66 |
|
|
$ |
0.75 |
| Weighted average number of common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
13,447,066 |
|
|
13,412,667 |
|
|
|
13,340,997 |
|
|
|
13,286,828 |
|
|
|
13,285,974 |
|
Diluted |
|
|
13,822,270 |
|
|
13,736,508 |
|
|
|
13,676,917 |
|
|
|
13,676,513 |
|
|
|
13,675,833 |
|
|
|
COASTAL FINANCIAL CORPORATIONAVERAGE BALANCES, YIELDS, AND RATES –
QUARTERLY(Dollars in thousands; unaudited) |
|
|
| |
|
For the Three Months Ended |
| |
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
|
|
Average Balance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Average Balance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Average Balance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
|
$ |
350,915 |
|
|
$ |
4,781 |
|
5.42 |
% |
|
$ |
418,165 |
|
|
$ |
5,683 |
|
5.47 |
% |
|
$ |
285,596 |
|
|
$ |
3,884 |
|
5.40 |
% |
|
Investment securities, available for sale (2) |
|
|
40 |
|
|
|
— |
|
— |
|
|
|
43 |
|
|
|
— |
|
3.13 |
|
|
|
100,283 |
|
|
|
543 |
|
2.15 |
|
|
Investment securities, held to maturity (2) |
|
|
48,945 |
|
|
|
675 |
|
5.49 |
|
|
|
49,737 |
|
|
|
686 |
|
5.55 |
|
|
|
17,703 |
|
|
|
223 |
|
5.00 |
|
|
Other investments |
|
|
11,140 |
|
|
|
33 |
|
1.18 |
|
|
|
10,592 |
|
|
|
174 |
|
6.61 |
|
|
|
11,943 |
|
|
|
29 |
|
0.96 |
|
|
Loans receivable (3) |
|
|
3,464,871 |
|
|
|
99,590 |
|
11.43 |
|
|
|
3,258,042 |
|
|
|
90,944 |
|
11.23 |
|
|
|
3,062,214 |
|
|
|
83,652 |
|
10.84 |
|
| Total interest earning
assets |
|
|
3,875,911 |
|
|
|
105,079 |
|
10.79 |
|
|
|
3,736,579 |
|
|
|
97,487 |
|
10.49 |
|
|
|
3,477,739 |
|
|
|
88,331 |
|
10.08 |
|
| Noninterest earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
|
(151,292 |
) |
|
|
|
|
|
|
(138,472 |
) |
|
|
|
|
|
|
(100,329 |
) |
|
|
|
|
|
Other noninterest earning assets |
|
|
268,903 |
|
|
|
|
|
|
|
255,205 |
|
|
|
|
|
|
|
220,750 |
|
|
|
|
|
|
Total assets |
|
$ |
3,993,522 |
|
|
|
|
|
|
$ |
3,853,312 |
|
|
|
|
|
|
$ |
3,598,160 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
$ |
2,966,527 |
|
|
$ |
32,083 |
|
4.30 |
% |
|
$ |
2,854,575 |
|
|
$ |
30,578 |
|
4.31 |
% |
|
$ |
2,515,093 |
|
|
$ |
25,451 |
|
4.01 |
% |
| FHLB advances and other
borrowings |
|
|
9,717 |
|
|
|
140 |
|
5.73 |
|
|
|
1,648 |
|
|
|
3 |
|
0.73 |
|
|
|
— |
|
|
|
— |
|
— |
|
| Subordinated debt |
|
|
44,234 |
|
|
|
598 |
|
5.38 |
|
|
|
44,197 |
|
|
|
598 |
|
5.44 |
|
|
|
44,084 |
|
|
|
580 |
|
5.22 |
|
| Junior subordinated
debentures |
|
|
3,591 |
|
|
|
71 |
|
7.87 |
|
|
|
3,590 |
|
|
|
71 |
|
7.95 |
|
|
|
3,589 |
|
|
|
71 |
|
7.85 |
|
| Total interest bearing
liabilities |
|
|
3,024,069 |
|
|
|
32,892 |
|
4.33 |
|
|
|
2,904,010 |
|
|
|
31,250 |
|
4.33 |
|
|
|
2,562,766 |
|
|
|
26,102 |
|
4.04 |
|
| Noninterest bearing
deposits |
|
|
588,178 |
|
|
|
|
|
|
|
584,661 |
|
|
|
|
|
|
|
698,532 |
|
|
|
|
|
| Other liabilities |
|
|
60,101 |
|
|
|
|
|
|
|
58,267 |
|
|
|
|
|
|
|
57,865 |
|
|
|
|
|
| Total shareholders'
equity |
|
|
321,174 |
|
|
|
|
|
|
|
306,374 |
|
|
|
|
|
|
|
278,997 |
|
|
|
|
|
| Total liabilities and
shareholders' equity |
|
$ |
3,993,522 |
|
|
|
|
|
|
$ |
3,853,312 |
|
|
|
|
|
|
$ |
3,598,160 |
|
|
|
|
|
| Net interest income |
|
|
|
$ |
72,187 |
|
|
|
|
|
$ |
66,237 |
|
|
|
|
|
$ |
62,229 |
|
|
| Interest rate spread |
|
|
|
|
|
6.46 |
% |
|
|
|
|
|
6.17 |
% |
|
|
|
|
|
6.04 |
% |
| Net interest margin (4) |
|
|
|
|
|
7.41 |
% |
|
|
|
|
|
7.13 |
% |
|
|
|
|
|
7.10 |
% |
(1) Yields and costs are
annualized.(2) For presentation in this table, average
balances and the corresponding average rates for investment
securities are based upon historical cost, adjusted for
amortization of premiums and accretion of
discounts.(3) Includes loans held for sale and
nonaccrual loans.(4) Net interest margin represents net
interest income divided by the average total interest earning
assets.
|
|
|
COASTAL FINANCIAL CORPORATIONSELECTED AVERAGE BALANCES, YIELDS, AND
RATES – BY SEGMENT - QUARTERLY(Dollars in thousands;
unaudited) |
|
|
| |
|
For the Three Months Ended |
| |
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands, unaudited) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
Community Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2) |
|
$ |
1,912,428 |
|
$ |
31,898 |
|
6.64 |
% |
|
$ |
1,895,699 |
|
$ |
30,741 |
|
6.52 |
% |
|
$ |
1,752,834 |
|
$ |
27,373 |
|
6.20 |
% |
|
Total interest earning assets |
|
|
1,912,428 |
|
|
31,898 |
|
6.64 |
|
|
|
1,895,699 |
|
|
30,741 |
|
6.52 |
|
|
|
1,752,834 |
|
|
27,373 |
|
6.20 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
982,280 |
|
|
7,264 |
|
2.94 |
% |
|
|
938,033 |
|
|
6,459 |
|
2.77 |
% |
|
|
920,707 |
|
|
5,067 |
|
2.18 |
% |
|
Intrabank liability |
|
|
406,641 |
|
|
5,540 |
|
5.42 |
|
|
|
429,452 |
|
|
5,836 |
|
5.47 |
|
|
|
223,221 |
|
|
3,036 |
|
5.40 |
|
| Total interest bearing
liabilities |
|
|
1,388,921 |
|
|
12,804 |
|
3.67 |
|
|
|
1,367,485 |
|
|
12,295 |
|
3.62 |
|
|
|
1,143,928 |
|
|
8,103 |
|
2.81 |
|
| Noninterest bearing
deposits |
|
|
523,507 |
|
|
|
|
|
|
528,214 |
|
|
|
|
|
|
608,906 |
|
|
|
|
| Net interest income |
|
|
|
$ |
19,094 |
|
|
|
|
|
$ |
18,446 |
|
|
|
|
|
$ |
19,270 |
|
|
| Net interest margin(3) |
|
|
|
|
|
3.97 |
% |
|
|
|
|
|
3.91 |
% |
|
|
|
|
|
4.36 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCBX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable (2)(4) |
|
$ |
1,552,443 |
|
$ |
67,692 |
|
17.35 |
% |
|
$ |
1,362,343 |
|
$ |
60,203 |
|
17.77 |
% |
|
$ |
1,309,380 |
|
$ |
56,279 |
|
17.05 |
% |
|
Intrabank asset |
|
|
496,475 |
|
|
6,764 |
|
5.42 |
|
|
|
610,646 |
|
|
8,299 |
|
5.47 |
|
|
|
374,632 |
|
|
5,095 |
|
5.40 |
|
|
Total interest earning assets |
|
|
2,048,918 |
|
|
74,456 |
|
14.46 |
|
|
|
1,972,989 |
|
|
68,502 |
|
13.96 |
|
|
|
1,684,012 |
|
|
61,374 |
|
14.46 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing deposits |
|
|
1,984,247 |
|
|
24,819 |
|
4.98 |
% |
|
|
1,916,542 |
|
|
24,119 |
|
5.06 |
% |
|
|
1,594,386 |
|
|
20,384 |
|
5.07 |
% |
| Total interest bearing
liabilities |
|
|
1,984,247 |
|
|
24,819 |
|
4.98 |
|
|
|
1,916,542 |
|
|
24,119 |
|
5.06 |
|
|
|
1,594,386 |
|
|
20,384 |
|
5.07 |
|
| Noninterest bearing
deposits |
|
|
64,671 |
|
|
|
|
|
|
56,447 |
|
|
|
|
|
|
89,626 |
|
|
|
|
| Net interest income |
|
|
|
$ |
49,637 |
|
|
|
|
|
$ |
44,383 |
|
|
|
|
|
$ |
40,990 |
|
|
| Net interest margin(3) |
|
|
|
|
|
9.64 |
% |
|
|
|
|
|
9.05 |
% |
|
|
|
|
|
9.66 |
% |
| Net interest margin, net of
Baas loan expense (5) |
|
|
|
|
|
3.31 |
% |
|
|
|
|
|
3.12 |
% |
|
|
|
|
|
4.24 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Three Months Ended |
| |
|
September 30, 2024 |
|
June 30, 2024 |
|
September 30, 2023 |
|
(dollars in thousands, unaudited) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
|
AverageBalance |
|
Interest &Dividends |
|
Yield / Cost
(1) |
| Treasury
& Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earning deposits with other banks |
|
$ |
350,915 |
|
$ |
4,781 |
|
5.42 |
% |
|
$ |
418,165 |
|
$ |
5,683 |
|
5.47 |
% |
|
$ |
285,596 |
|
$ |
3,884 |
|
5.40 |
% |
|
Investment securities, available for sale (6) |
|
|
40 |
|
|
— |
|
— |
|
|
|
43 |
|
|
— |
|
3.13 |
|
|
|
100,283 |
|
|
543 |
|
2.15 |
|
|
Investment securities, held to maturity (6) |
|
|
48,945 |
|
|
675 |
|
5.49 |
|
|
|
49,737 |
|
|
686 |
|
5.55 |
|
|
|
17,703 |
|
|
223 |
|
5.00 |
|
|
Other investments |
|
|
11,140 |
|
|
33 |
|
1.18 |
|
|
|
10,592 |
|
|
174 |
|
6.61 |
|
|
|
11,943 |
|
|
29 |
|
0.96 |
|
| Total interest earning
assets |
|
|
411,040 |
|
|
5,489 |
|
5.31 |
% |
|
|
478,537 |
|
|
6,543 |
|
5.50 |
% |
|
|
415,525 |
|
|
4,679 |
|
4.47 |
% |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances and borrowings |
|
$ |
9,717 |
|
$ |
140 |
|
5.73 |
% |
|
|
1,648 |
|
|
3 |
|
0.73 |
% |
|
|
— |
|
|
— |
|
— |
% |
|
Subordinated debt |
|
|
44,234 |
|
|
598 |
|
5.38 |
% |
|
|
44,197 |
|
|
598 |
|
5.44 |
% |
|
|
44,084 |
|
|
580 |
|
5.22 |
% |
|
Junior subordinated debentures |
|
|
3,591 |
|
|
71 |
|
7.87 |
|
|
|
3,590 |
|
|
71 |
|
7.95 |
|
|
|
3,589 |
|
|
71 |
|
7.85 |
|
|
Intrabank liability, net (7) |
|
|
89,834 |
|
|
1,224 |
|
5.42 |
|
|
|
181,194 |
|
|
2,463 |
|
5.47 |
|
|
|
151,411 |
|
|
2,059 |
|
5.40 |
|
| Total interest bearing
liabilities |
|
|
147,376 |
|
|
2,033 |
|
5.49 |
|
|
|
230,629 |
|
|
3,135 |
|
5.47 |
|
|
|
199,084 |
|
|
2,710 |
|
5.40 |
|
| Net interest income |
|
|
|
$ |
3,456 |
|
|
|
|
|
$ |
3,408 |
|
|
|
|
|
$ |
1,969 |
|
|
| Net interest margin(3) |
|
|
|
|
|
3.34 |
% |
|
|
|
|
|
2.86 |
% |
|
|
|
|
|
1.88 |
% |
(1) Yields and costs are
annualized. (2) Includes loans held for sale and
nonaccrual loans. (3) Net interest margin
represents net interest income divided by the average total
interest earning assets. (4) CCBX yield does not
include the impact of BaaS loan expense. BaaS loan expense
represents the amount paid or payable to partners for credit
enhancements, fraud enhancements and originating & servicing
CCBX loans. See reconciliation of the non-GAAP measures at the end
of this earnings release for the impact of BaaS loan expense on
CCBX loan yield. (5) Net interest margin, net of
BaaS loan expense includes the impact of BaaS loan expense. BaaS
loan expense represents the amount paid or payable to partners for
credit enhancements, fraud enhancements, originating &
servicing CCBX loans. See reconciliation of the non-GAAP measures
at the end of this earnings release. (6) For presentation
in this table, average balances and the corresponding average rates
for investment securities are based upon historical cost, adjusted
for amortization of premiums and accretion of
discounts. (7) Intrabank assets and liabilities are
consolidated for period calculations and presented as intrabank
asset, net or intrabank liability, net in the table above.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial
measures to provide meaningful supplemental information regarding
the Company’s operational performance and to enhance investors’
overall understanding of such financial performance.
However, these non-GAAP financial measures are
supplemental and are not a substitute for an analysis based on GAAP
measures. As other companies may use different calculations for
these adjusted measures, this presentation may not be comparable to
other similarly titled adjusted measures reported by other
companies.
The following non-GAAP measures are presented to
illustrate the impact of BaaS loan expense on net loan income and
yield on CCBX loans and the impact of BaaS loan expense on net
interest income and net interest margin.
Net BaaS loan income divided by average CCBX
loans is a non-GAAP measure that includes the impact BaaS loan
expense on net BaaS loan income and the yield on CCBX loans. The
most directly comparable GAAP measure is yield on CCBX loans.
Net interest income net of BaaS loan expense is
a non-GAAP measure that includes the impact BaaS loan expense on
net interest income. The most directly comparable GAAP measure is
net interest income.
Net interest margin, net of BaaS loan expense is
a non-GAAP measure that includes the impact of BaaS loan expense on
net interest rate margin. The most directly comparable GAAP measure
is net interest margin.
Reconciliations of the GAAP and non-GAAP
measures are presented below.
| |
|
As of and for the Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
| Net BaaS
loan income divided by average CCBX loans: |
| CCBX loan yield (GAAP)(1) |
|
|
17.35 |
% |
|
|
17.77 |
% |
|
|
17.05 |
% |
|
Total average CCBX loans receivable |
|
$ |
1,552,443 |
|
|
$ |
1,362,343 |
|
|
$ |
1,309,380 |
|
|
Interest and earned fee income on CCBX loans (GAAP) |
|
|
67,692 |
|
|
|
60,203 |
|
|
|
56,279 |
|
|
BaaS loan expense |
|
|
(32,612 |
) |
|
|
(29,076 |
) |
|
|
(23,003 |
) |
|
Net BaaS loan income |
|
$ |
35,080 |
|
|
$ |
31,127 |
|
|
$ |
33,276 |
|
|
Net BaaS loan income divided by average CCBX loans (1) |
|
|
8.99 |
% |
|
|
9.19 |
% |
|
|
10.08 |
% |
| Net interest margin,
net of BaaS loan expense: |
|
|
|
|
|
|
|
|
|
CCBX interest margin (1) |
|
|
9.64 |
% |
|
|
9.05 |
% |
|
|
9.66 |
% |
|
CCBX earning assets |
|
|
2,048,918 |
|
|
|
1,972,989 |
|
|
|
1,684,012 |
|
|
Net interest income |
|
|
49,637 |
|
|
|
44,383 |
|
|
|
40,990 |
|
|
Less: BaaS loan expense |
|
|
(32,612 |
) |
|
|
(29,076 |
) |
|
|
(23,003 |
) |
|
Net interest income, net of BaaS loan expense |
|
$ |
17,025 |
|
|
$ |
15,307 |
|
|
$ |
17,987 |
|
| CCBX net interest margin, net
of BaaS loan expense (1) |
|
|
3.31 |
% |
|
|
3.12 |
% |
|
|
4.24 |
% |
(1) Annualized calculations for periods
presented.
APPENDIX A - As
of September 30, 2024
Industry Concentration
We have a diversified loan portfolio,
representing a wide variety of industries. Our major categories of
loans are commercial real estate, consumer and other loans,
residential real estate, commercial and industrial, and
construction, land and land development loans. Together they
represent $3.43 billion in outstanding loan balances. When combined
with $2.29 billion in unused commitments the total of these
categories is $5.72 billion.
Commercial real estate loans
represent the largest segment of our loans, comprising 39.8% of our
total balance of outstanding loans as of September 30, 2024.
Unused commitments to extend credit represents an additional $41.5
million, and the combined total in commercial real estate loans
represents $1.40 billion, or 24.6% of our total outstanding loans
and loan commitments.
The following table summarizes our loan
commitment by industry for our commercial real estate portfolio as
of September 30, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Apartments |
|
$ |
382,498 |
|
$ |
5,685 |
|
$ |
388,183 |
|
6.8 |
% |
|
$ |
3,714 |
|
103 |
| Hotel/Motel |
|
|
155,441 |
|
|
189 |
|
|
155,630 |
|
2.7 |
|
|
|
6,758 |
|
23 |
| Convenience Store |
|
|
142,366 |
|
|
614 |
|
|
142,980 |
|
2.5 |
|
|
|
2,296 |
|
62 |
| Office |
|
|
123,423 |
|
|
8,204 |
|
|
131,627 |
|
2.3 |
|
|
|
1,371 |
|
90 |
| Warehouse |
|
|
102,818 |
|
|
2,000 |
|
|
104,818 |
|
1.8 |
|
|
|
1,743 |
|
59 |
| Retail |
|
|
107,934 |
|
|
620 |
|
|
108,554 |
|
1.9 |
|
|
|
1,018 |
|
106 |
| Mixed use |
|
|
93,490 |
|
|
5,273 |
|
|
98,763 |
|
1.7 |
|
|
|
1,154 |
|
81 |
| Mini Storage |
|
|
79,395 |
|
|
14,330 |
|
|
93,725 |
|
1.7 |
|
|
|
3,452 |
|
23 |
| Strip Mall |
|
|
44,089 |
|
|
— |
|
|
44,089 |
|
0.8 |
|
|
|
6,298 |
|
7 |
| Manufacturing |
|
|
34,599 |
|
|
1,200 |
|
|
35,799 |
|
0.6 |
|
|
|
1,193 |
|
29 |
| Groups < 0.70% of total |
|
|
96,393 |
|
|
3,392 |
|
|
99,785 |
|
1.8 |
|
|
|
1,205 |
|
80 |
|
Total |
|
$ |
1,362,446 |
|
$ |
41,507 |
|
$ |
1,403,953 |
|
24.6 |
% |
|
$ |
2,055 |
|
663 |
|
|
Consumer loans comprise 33.0%
of our total balance of outstanding loans as of September 30,
2024. Unused commitments to extend credit represents an additional
$1.07 billion, and the combined total in consumer and other loans
represents $2.20 billion, or 38.4% of our total outstanding loans
and loan commitments. As illustrated in the table below, our CCBX
partners bring in a large number of mostly smaller dollar loans,
resulting in an average consumer loan balance of just $900. CCBX
consumer loans are underwritten to CCBX credit standards and
underwriting of these loans is regularly tested, including
quarterly testing for partners with portfolio balances greater than
$10.0 million.
The following table summarizes our loan
commitment by industry for our consumer and other loan portfolio as
of September 30, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment (1) |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| CCBX
consumer loans |
|
Credit cards |
|
$ |
633,691 |
|
$ |
1,055,684 |
|
$ |
1,689,375 |
|
29.5 |
% |
|
$ |
1.7 |
|
369,404 |
| Installment loans |
|
|
471,813 |
|
|
7,112 |
|
|
478,925 |
|
8.4 |
|
|
|
0.9 |
|
513,897 |
| Lines of credit |
|
|
1,362 |
|
|
— |
|
|
1,362 |
|
0.0 |
|
|
|
2.4 |
|
558 |
| Other loans |
|
|
9,053 |
|
|
— |
|
|
9,053 |
|
0.2 |
|
|
|
— |
|
365,834 |
| Community
bank consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Installment loans |
|
|
1,291 |
|
|
1 |
|
|
1,292 |
|
0.0 |
|
|
|
51.6 |
|
25 |
| Lines of credit |
|
|
194 |
|
|
365 |
|
|
559 |
|
0.0 |
|
|
|
6.1 |
|
32 |
| Other loans |
|
|
12,688 |
|
|
3,000 |
|
|
15,688 |
|
0.3 |
|
|
|
32.5 |
|
390 |
|
Total |
|
$ |
1,130,092 |
|
$ |
1,066,162 |
|
$ |
2,196,254 |
|
38.4 |
% |
|
$ |
0.9 |
|
1,250,140 |
(1) Total exposure on CCBX loans is
subject to CCBX partner/portfolio maximum limits.
Residential real estate loans
comprise 13.9% of our total balance of outstanding loans as of
September 30, 2024. Unused commitments to extend credit
represents an additional $522.8 million, and the combined total in
residential real estate loans represents $1.00 billion, or 17.5% of
our total outstanding loans and loan commitments.
The following table summarizes our loan
commitment by industry for our residential real estate loan
portfolio as of September 30, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment (1) |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
CCBX residential real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity line of
credit |
|
$ |
265,402 |
|
$ |
472,385 |
|
$ |
737,787 |
|
12.9 |
% |
|
$ |
25 |
|
10,742 |
| Community bank
residential real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Closed end, secured by first
liens |
|
|
176,066 |
|
|
2,961 |
|
|
179,027 |
|
3.1 |
|
|
|
555 |
|
317 |
| Home equity line of
credit |
|
|
25,427 |
|
|
46,515 |
|
|
71,942 |
|
1.3 |
|
|
|
106 |
|
239 |
| Closed end, second liens |
|
|
10,974 |
|
|
925 |
|
|
11,899 |
|
0.2 |
|
|
|
366 |
|
30 |
|
Total |
|
$ |
477,869 |
|
$ |
522,786 |
|
$ |
1,000,655 |
|
17.5 |
% |
|
$ |
42 |
|
11,328 |
(1) Total exposure on CCBX loans is
subject to CCBX partner/portfolio maximum limits.
Commercial and industrial loans
comprise 8.5% of our total balance of outstanding loans as of
September 30, 2024. Unused commitments to extend credit
represents an additional $598.4 million, and the combined total in
commercial and industrial loans represents $891.0 million, or 15.6%
of our total outstanding loans and loan commitments. Included in
commercial and industrial loans is $103.9 million in outstanding
capital call lines, with an additional $504.6 million in available
loan commitments which is limited to a $350.0 million portfolio
maximum. Capital call lines are provided to venture capital firms
through one of our CCBX BaaS clients. These loans are secured by
the capital call rights and are individually underwritten to the
Bank’s credit standards and the underwriting is reviewed by the
Bank on every capital call line.
The following table summarizes our loan
commitment by industry for our commercial and industrial loan
portfolio as of September 30, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment (1) |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
| Consolidated
C&I loans |
|
Capital Call Lines |
|
$ |
103,924 |
|
$ |
504,561 |
|
$ |
608,485 |
|
10.6 |
% |
|
$ |
764 |
|
136 |
| Construction/Contractor
Services |
|
|
27,463 |
|
|
34,658 |
|
|
62,121 |
|
1.1 |
|
|
|
136 |
|
202 |
| Financial Institutions |
|
|
48,648 |
|
|
— |
|
|
48,648 |
|
0.9 |
|
|
|
4,054 |
|
12 |
| Retail |
|
|
33,003 |
|
|
5,725 |
|
|
38,728 |
|
0.7 |
|
|
|
15 |
|
2,247 |
| Manufacturing |
|
|
6,124 |
|
|
5,460 |
|
|
11,584 |
|
0.2 |
|
|
|
149 |
|
41 |
| Medical / Dental / Other
Care |
|
|
6,864 |
|
|
2,731 |
|
|
9,595 |
|
0.2 |
|
|
|
528 |
|
13 |
| Groups < 0.20% of total |
|
|
66,553 |
|
|
45,299 |
|
|
111,852 |
|
2.0 |
|
|
|
58 |
|
1,143 |
|
Total |
|
$ |
292,579 |
|
$ |
598,434 |
|
$ |
891,013 |
|
15.6 |
% |
|
$ |
77 |
|
3,794 |
(1) Total exposure on CCBX loans is
subject to CCBX partner/portfolio maximum limits.
Construction, land and land development
loans comprise 4.8% of our total balance of outstanding
loans as of September 30, 2024. Unused commitments to extend
credit represents an additional $63.5 million, and the combined
total in construction, land and land development loans represents
$226.6 million, or 4.0% of our total outstanding loans and loan
commitments.
The following table details our loan commitment
for our construction, land and land development portfolio as of
September 30, 2024:
|
(dollars in thousands; unaudited) |
|
Outstanding Balance |
|
Available Loan Commitments |
|
Total Outstanding Balance & Available
Commitment |
|
% of Total Loans(Outstanding Balance
& Available Commitment) |
|
Average Loan Balance |
|
Number of Loans |
|
Commercial construction |
|
$ |
97,798 |
|
$ |
41,521 |
|
$ |
139,319 |
|
2.5 |
% |
|
$ |
7,523 |
|
13 |
| Residential construction |
|
|
35,822 |
|
|
16,846 |
|
|
52,668 |
|
0.9 |
|
|
|
1,990 |
|
18 |
| Developed land loans |
|
|
14,863 |
|
|
723 |
|
|
15,586 |
|
0.3 |
|
|
|
743 |
|
20 |
| Undeveloped land loans |
|
|
8,606 |
|
|
4,086 |
|
|
12,692 |
|
0.2 |
|
|
|
574 |
|
15 |
| Land development |
|
|
5,968 |
|
|
345 |
|
|
6,313 |
|
0.1 |
|
|
|
597 |
|
10 |
|
Total |
|
$ |
163,057 |
|
$ |
63,521 |
|
$ |
226,578 |
|
4.0 |
% |
|
$ |
2,145 |
|
76 |
|
|
Exposure and risk in our construction, land and
land development portfolio is in line with our average
historically, compared to June 30, 2024 when the balance was
elevated as indicated in the following table:
| |
|
Outstanding Balance as of |
| (dollars in thousands;
unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
March 31,2024 |
|
December 31,2023 |
|
September 30,2023 |
|
Commercial construction |
|
$ |
97,798 |
|
$ |
110,372 |
|
$ |
102,099 |
|
$ |
81,489 |
|
$ |
91,396 |
| Residential construction |
|
|
35,822 |
|
|
34,652 |
|
|
28,751 |
|
|
34,213 |
|
|
33,971 |
| Undeveloped land loans |
|
|
8,606 |
|
|
8,372 |
|
|
8,190 |
|
|
7,890 |
|
|
8,310 |
| Developed land loans |
|
|
14,863 |
|
|
13,954 |
|
|
14,307 |
|
|
20,515 |
|
|
21,369 |
| Land development |
|
|
5,968 |
|
|
5,714 |
|
|
7,515 |
|
|
12,993 |
|
|
12,640 |
|
Total |
|
$ |
163,057 |
|
$ |
173,064 |
|
$ |
160,862 |
|
$ |
157,100 |
|
$ |
167,686 |
|
|
Commitments to extend credit
total $2.29 billion at September 30, 2024, however
we do not anticipate our customers using the $2.29 billion that is
showing as available.
The following table presents outstanding
commitments to extend credit as of September 30, 2024:
|
Consolidated |
|
|
|
(dollars in thousands; unaudited) |
|
As of September 30, 2024 |
|
Commitments to extend credit: |
|
|
|
Commercial and industrial loans |
|
$ |
93,873 |
|
Commercial and industrial loans - capital call lines |
|
|
504,561 |
|
Construction – commercial real estate loans |
|
|
46,007 |
|
Construction – residential real estate loans |
|
|
17,514 |
|
Residential real estate loans |
|
|
522,786 |
|
Commercial real estate loans |
|
|
41,507 |
|
Credit cards |
|
|
1,055,684 |
|
Consumer and other loans |
|
|
10,478 |
| Total commitments to extend
credit |
|
$ |
2,292,410 |
| |
We have individual CCBX partner portfolio limits
with our each of our partners to manage loan concentration risk,
liquidity risk, and counter-party partner risk. For example, as of
September 30, 2024, capital call lines outstanding balance
totaled $103.9 million, and while commitments totaled $504.6
million, the commitments are limited to a maximum of $350.0 million
by agreement with the partner. If a CCBX partner goes over their
individual limit, it would be a breach of their contract and the
Bank may impose penalties and would not be required to fund the
loan.
See the table below for CCBX portfolio maximums
and related available commitments:
|
CCBX |
|
|
|
|
|
|
|
|
|
(dollars in thousands; unaudited) |
|
Balance |
|
Percent of CCBX loans receivable |
Available Commitments (1) |
|
Maximum Portfolio Size |
Cash Reserve/Pledge Account Amount
(2) |
| Commercial and
industrial loans: |
|
|
|
|
|
|
|
Capital call lines |
|
$ |
103,924 |
|
|
6.8 |
% |
$ |
504,561 |
|
$ |
350,000 |
$ |
— |
|
All other commercial & industrial loans |
|
|
36,494 |
|
|
2.4 |
|
|
16,922 |
|
|
285,153 |
|
675 |
| Real estate loans: |
|
|
|
|
|
|
|
|
|
Home equity lines of credit (3) |
|
|
265,402 |
|
|
17.5 |
|
|
472,385 |
|
|
375,000 |
|
35,597 |
| Consumer and other
loans: |
|
|
|
|
|
|
|
Credit cards - cash secured |
|
|
180 |
|
|
|
|
— |
|
|
|
— |
|
Credit cards - unsecured |
|
|
633,511 |
|
|
|
|
1,055,684 |
|
|
|
37,065 |
|
Credit cards - total |
|
|
633,691 |
|
|
41.6 |
|
|
1,055,684 |
|
|
807,263 |
|
37,065 |
|
Installment loans - cash secured |
|
|
129,138 |
|
|
|
|
7,112 |
|
|
|
— |
|
Installment loans - unsecured |
|
|
342,675 |
|
|
|
|
— |
|
|
|
2,222 |
|
Installment loans - total |
|
|
471,813 |
|
|
31.0 |
|
|
7,112 |
|
|
1,630,027 |
|
2,222 |
|
Other consumer and other loans |
|
|
10,415 |
|
|
0.7 |
|
|
— |
|
|
7,557 |
|
383 |
|
Gross CCBX loans receivable |
|
|
1,521,739 |
|
|
100.0 |
% |
|
2,056,664 |
|
|
3,455,000 |
$ |
75,942 |
| Net deferred origination
fees |
|
|
(447 |
) |
|
|
|
|
|
|
|
Loans receivable |
|
$ |
1,521,292 |
|
|
|
|
|
|
|
(1) Remaining commitment available, net of
outstanding balance.(2) Balances are as of October 4, 2024.(3)
These home equity lines of credit are secured by residential real
estate and are accessed by using a credit card, but are classified
as 1-4 family residential properties per regulatory guidelines.
APPENDIX B -As
of September 30, 2024
CCBX – BaaS Reporting
Information
During the quarter ended September 30,
2024, $70.1 million was recorded in BaaS credit enhancements
related to the provision for credit losses - loans and reserve for
unfunded commitments for CCBX partner loans and negative deposit
accounts. Agreements with our CCBX partners provide for a credit
enhancement provided by the partner which protects the Bank by
indemnifying or reimbursing incurred losses. In accordance with
accounting guidance, we estimate and record a provision for
expected losses for these CCBX loans, unfunded commitments and
negative deposit accounts. When the provision for credit losses -
loans and provision for unfunded commitments is recorded, a credit
enhancement asset is also recorded on the balance sheet through
noninterest income (BaaS credit enhancements) in recognition of the
CCBX partner legal commitment to indemnify or reimburse losses. The
credit enhancement asset is relieved as credit enhancement payments
and recoveries are received from the CCBX partner or taken from the
partner's cash reserve account. Agreements with our CCBX partners
also provide protection to the Bank from fraud by indemnifying or
reimbursing incurred fraud losses. BaaS fraud includes noncredit
fraud losses on loans and deposits originated through partners.
Fraud losses are recorded when incurred as losses in noninterest
expense, and the enhancement received from the CCBX partner is
recorded in noninterest income, resulting in a net impact of zero
to the income statement. Many CCBX partners also pledge a cash
reserve account at the Bank which the Bank can collect from when
losses occur that is then replenished by the partner on a regular
interval. Although agreements with our CCBX partners provide for
credit enhancements that provide protection to the Bank from credit
and fraud losses by indemnifying or reimbursing incurred credit and
fraud losses, if our partner is unable to fulfill their contracted
obligation then the bank would be exposed to additional loan and
deposit losses if the cash flows on the loans were not sufficient
to fund the reimbursement of loan losses, as a result of this
counterparty risk. If a CCBX partner does not replenish their cash
reserve account the Bank may consider an alternative plan for
funding the cash reserve. This may involve the possibility of
adjusting the funding amounts or timelines to better align with the
partner's specific situation. If a mutually agreeable funding plan
is not agreed to, the Bank could declare the agreement in default,
take over servicing and cease paying the partner for servicing the
loan and providing credit enhancements. The Bank would evaluate any
remaining credit enhancement asset from the CCBX partner in the
event the partner failed to determine if a write-off is
appropriate. If a write-off occurs, the Bank would retain the full
yield and any fee income on the loan portfolio going forward, and
our BaaS loan expense would decrease once default occurred and
payments to the CCBX partner were stopped.
The Bank records contractual interest earned
from the borrower on CCBX partner loans in interest income,
adjusted for origination costs which are paid or payable to the
CCBX partner. BaaS loan expense represents the amount paid or
payable to partners for credit and fraud enhancements and
originating & servicing CCBX loans. To determine net revenue
(Net BaaS loan income) earned from CCBX loan relationships, the
Bank takes BaaS loan interest income and deducts BaaS loan expense
to arrive at Net BaaS loan income (A reconciliation of the non-GAAP
measures are set forth in the preceding section of this earnings
release.) which can be compared to interest income on the Company’s
community bank loans.
The following table illustrates how CCBX partner
loan income and expenses are recorded in the financial
statements:
|
Loan income and related loan expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
Yield on loans (1) |
|
|
17.35 |
% |
|
|
17.77 |
% |
|
|
17.05 |
% |
| BaaS loan interest income |
|
$ |
67,692 |
|
|
$ |
60,203 |
|
|
$ |
56,279 |
|
| Less: BaaS loan expense |
|
|
32,612 |
|
|
|
29,076 |
|
|
|
23,003 |
|
|
Net BaaS loan income (2) |
|
$ |
35,080 |
|
|
$ |
31,127 |
|
|
$ |
33,276 |
|
| Net BaaS loan income divided
by average BaaS loans (1)(2) |
|
|
8.99 |
% |
|
|
9.19 |
% |
|
|
10.08 |
% |
(1) Annualized calculation for quarterly periods
shown.(2) A reconciliation of the non-GAAP measures are set forth
in the preceding section of this earnings release.
An increase in average CCBX loans receivable
resulted in increased interest income on CCBX loans during the
quarter ended September 30, 2024 compared to the quarter ended
June 30, 2024. The increase in average CCBX loans receivable
was primarily due to growth in the CCBX loan portfolio as part of
our strategy to optimize the CCBX loan portfolio and strengthen our
balance sheet through originating higher quality new loans and
enhanced credit standards. Increased interest rates and growth in
CCBX loans and deposits has resulted in increases in interest
income and expense for the quarter ended September 30, 2024
compared to the quarter ended September 30, 2023.
The following tables are a summary of the
interest components, direct fees, and expenses of BaaS for the
periods indicated and are not inclusive of all income and expense
related to BaaS.
|
Interest income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
Loan interest income |
|
$ |
67,692 |
|
$ |
60,203 |
|
$ |
56,279 |
|
Total BaaS interest income |
|
$ |
67,692 |
|
$ |
60,203 |
|
$ |
56,279 |
|
Interest expense |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
BaaS interest expense |
|
$ |
24,819 |
|
$ |
24,119 |
|
$ |
20,384 |
|
Total BaaS interest expense |
|
$ |
24,819 |
|
$ |
24,119 |
|
$ |
20,384 |
|
BaaS income |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
BaaS program income: |
|
|
|
|
|
|
|
Servicing and other BaaS fees |
|
$ |
1,044 |
|
$ |
1,525 |
|
$ |
997 |
| Transaction fees |
|
|
1,696 |
|
|
1,309 |
|
|
1,036 |
| Interchange fees |
|
|
1,853 |
|
|
1,625 |
|
|
1,216 |
| Reimbursement of expenses |
|
|
1,843 |
|
|
1,637 |
|
|
1,152 |
|
BaaS program income |
|
|
6,436 |
|
|
6,096 |
|
|
4,401 |
| BaaS indemnification
income: |
|
|
|
|
|
|
| BaaS credit enhancements |
|
|
70,108 |
|
|
60,826 |
|
|
25,926 |
| BaaS fraud enhancements |
|
|
2,084 |
|
|
1,784 |
|
|
2,850 |
|
BaaS indemnification income |
|
|
72,192 |
|
|
62,610 |
|
|
28,776 |
| Total noninterest BaaS
income |
|
$ |
78,628 |
|
$ |
68,706 |
|
$ |
33,177 |
| |
Servicing and other BaaS fees decreased $481,000
in the quarter ended September 30, 2024 compared to the
quarter ended June 30, 2024 while transaction fees and
interchange fees increased $387,000 and $228,000, respectively. We
expect servicing and other BaaS fees to decrease and transaction
and interchange fees to increase as partner activity grows and
contracted minimum fees are replaced with recurring fees and then
exceed those minimum fees.
|
BaaS loan and fraud expense: |
|
Three Months Ended |
|
(dollars in thousands; unaudited) |
|
September 30,2024 |
|
June 30,2024 |
|
September 30,2023 |
|
BaaS loan expense |
|
$ |
32,612 |
|
$ |
29,076 |
|
$ |
23,003 |
| BaaS fraud expense |
|
|
2,084 |
|
|
1,784 |
|
|
2,850 |
|
Total BaaS loan and fraud expense |
|
$ |
34,696 |
|
$ |
30,860 |
|
$ |
25,853 |
|
|
A photo accompanying this announcement is
available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/2d50cba0-18d9-4c78-8e96-0418250a8658
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